GM. This is Milk Road Macro, the newsletter that’s been forced to monitor the situation in a small body of water for so long, we’re beginning to get seasick.
Here’s what we’ve got for you today:
- ✍️ Strait up blocked.
- ✍️ ‘Run it hot’ summer.
- 🎙️ The Milk Road Macro Show: “This Is How Every Crisis Starts” w/ Jim Bianco.
- 🍪 Berkshire Hathaway is deepening its bet on AI.
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Prices as of 10:00 a.m. ET.
STRAIT UP BLOCKED
Strait’s closed.
FrFr, maybe. It’s still not really clear. And it’ll probably be different by the time I finish writing this.
Here’s what happened this time.
Over the weekend, the United States executed tactical military strikes targeting Iranian air defense systems, a ground control station, and several drone launch pads.
These targets were reportedly targeting commercial shipping vessels. Which is very unchill.
In response, Kuwait activated its national air defense systems to intercept retaliatory Iranian missiles and drones targeting U.S. military assets stationed in the country.
Basically, Iran shot back immediately.
This escalatory spiral has cooled since this happened, but this is legitimately the closest we’ve come in a while to both sides just going all out and throwing down.
Iran said they were completely pulling out of all negotiations and going back to blockading the Strait.
Trump quickly got to tweetin’ and got Hezbollah and Israel to agree to stand down. Apparently, Israel's striking Lebanon and planning a huge ground operation was a big part of what kicked this off initially.
I think Trump’s face here speaks for all of us at this point.
It’s not clear at the time of writing where things stand, but suffice it to say that the Strait is still mostly closed and the conflict and the resultant energy crisis are far from resolved.
The immediate transmission of this supply shock was felt in the energy markets, where Brent crude surged 5% in early trading to $95.69 per barrel.
West Texas Intermediate crude also decided to pop off trade near $95 per barrel before Trump cooled things down. Since the Tweeter in Chief got a handle on things, the price slipped back to $92.
Beyond the immediate disruption to energy flows, the closure of the Strait of Hormuz is generating severe secondary macroeconomic consequences.
The reduction in maritime transit has choked off the supply of critical chemical fertilizers. This is something we’ve warned about before, but the effects of which are still mostly on the horizon.
While the immediate focus of market participants is centered on crude pricing, the fertilizer deficit represents a latent risk for the 2027 agricultural crop cycle, threatening to trigger a secondary wave of global food inflation.
In other words, we might have inflation problems for several years because of this conflict.
Tehran is leveraging its missile and drone inventory to terrify commercial shippers and maintain an artificial blockade, betting that the United States lacks the domestic political appetite for a ground intervention ahead of the November congressional midterm elections.
This gridlock means energy prices are probably going to stay higher for longer. Probably higher and longer than the markets currently expect.
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PMF = Product Market Fit
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- Annualized volume is somewhere around $178B.
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‘RUN IT HOT’ SUMMER
On June 1st, 2026, the domestic ISM Manufacturing PMI printed at a smokin’ hot 54.0.
Absolute banger, but what does that mean?
It means the business cycle is still accelerating and the economy is kicking into high gear.
It also means bears are rekt.
The U.S. manufacturing sector remains firmly in expansionary territory, further validating the resilient growth narrative supporting equity valuations.
Not to brag, but we’ve been pounding the table calling for this for over six months, and it’s nice to finally see it playing out. If you want to join in the conversation with us in discord and see how the other Milk Road PRO analysts and I are navigating all of this in our portfolios, try Milk Road PRO for only one dollar, here.
This strength in the U.S. is mirrored by its top economic competition, China.
Beijing is launching an extensive five-year urban renewal campaign. And it looks like they mean business. They’ve earmarked 15 to 20T yuan ($2.2 to $2.9T) to revitalize struggling domestic construction and real estate developers.
They’re basically trying to bail out their real estate market.
But this also includes plans to build 200,000 kilometers of new gas pipelines and 175,000 kilometers of drainage and water supply lines by 2030.
However, funding this program remains highly challenging given local government debt loads, a multi-year property depression, and demographic headwind constraints. It’s easy to say you’re going to spend $2.5T. It’s harder to actually cut the checks.
Wrapping up
Look, the bottom line is we are living through one of the largest economic crises in history. Energy and food inflation are probably going to be much higher than anyone expects for longer than anyone wants.
And,
The AI race is an unstoppable juggernaut that just utterly does. Not. Care.
The market is saying, “We know there’s a crisis, we’ll deal with it later.”
It’s dangerous to get bearish here. I actually read one analyst’s report this weekend that said, “It’s like these stocks are collapsing to the upside.”
The economy and the market are accelerating and not showing signs of slowing down.
Eventually, there will be some headwinds, but for the moment, hold on tight.
Disclaimer: Volatility and uncertainty remain unusually high. There is a non-zero risk that Iran and the U.S. end up doing serious permanent damage to global energy infrastructure if things get worse.
Try not to get emotional.
Stay safe. Stay educated. Stay bullish.
THIS IS HOW EVERY CRISIS STARTS ⚠️
In today's episode, we sat down with Jim Bianco of Bianco Research to dig into whether today's market disruption is just temporary liquidity stress or a deeper structural problem hiding in plain sight.
Here's what you'll hear:
- Why global oil inventories are being drawn down to operational minimums, and the shortage risk if the Strait stays shut.
- How a more factional FOMC could box in incoming Fed chair Kevin Warsh, even if he wants to ease.
- Why ~41 stocks now make up nearly half the S&P, the highest concentration since the railroad era.
- How mega IPOs like SpaceX, Anthropic, and OpenAI could force index funds to sell incumbents to buy in.
Hit play and dig in 👇
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Asia stocks mixed amid U.S.-Iran uncertainty as Nikkei and KOSPI retreat from record highs.
The Canadian GDP stalled in the first quarter of 2026, holding the 0.2% contraction from the last quarter of 2025 and contrasting with market expectations that it would expand by 0.3%
Berkshire Hathaway is deepening its bet on artificial intelligence and one of the industry’s dominant players, investing an additional $10B in Alphabet through a private stock purchase.
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