GM. This is Milk Road Macro, the newsletter that’s smoother than a rate cut rumor on a green market day.
Here’s what we’ve got for you today:
- ✍️ Everything you need to know about what’s next for oil, risk assets and central banks.
- 🎙️ The Milk Road Macro Show: A Massive Sell-Off Is Starting… And Most Investors Don’t See It w/ Steven Van Metre.
- 🍪 Okta CEO: companies must change 40% of what they.
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Prices as of 10:00 a.m. ET.
EVERYTHING YOU NEED TO KNOW ABOUT WHAT’S NEXT FOR OIL, RISK ASSETS AND CENTRAL BANKS
The war in the Middle East is continuing with few signs of an off-ramp.
And crucially, the Strait of Hormuz is still effectively closed.
This means a huge chunk of the world’s energy supply is being choked off.
Putting more and more upward pressure on energy prices.
In just two weeks, this situation has moved from a potential slight disturbance to a major global problem with big implications for economies, central banks and risk asset prices.
So, what’s the latest?
When will the Strait be reopened?
What’s next for oil and risk assets?
And what’s next for central banks?
Let’s take a look…
What’s the latest?
The Strait of Hormuz is still effectively closed, with Iran continuing to attack tankers in the vital trade waterway.
This means that at least 10% of daily global crude oil supply (10 million barrels) is being choked off every single day that passes.
That is despite the many policy interventions from countries across the world, including the release of strategic energy reserves and rerouting oil away from the Middle East through pipelines.
This situation puts more and more upward pressure on global energy prices with every day that passes.
This is “the largest supply disruption in the history of the global oil market”, according to the International Energy Agency.
Here are some significant developments over recent days:
- T he U.S. attacked military targets on the island of Kharg, an island representing ~90% of Iranian oil exports, escalating the conflict.
- Iran retaliated by targeting the UAE’s Fujairah, which is one of the most important oil hubs in the Middle East.
- The U.S. repositioned an amphibious assault team to the Middle East, which may be viewed as a precursor to a ground assault.
But while oil is the main story, a closure of the Strait also has a big impact on the supply of fertilizer, helium (vital for semiconductor manufacturing), and industrial chemicals.
About one third of global fertilizer is shipped via the Strait - sparking major concerns over global food production in the event of a prolonged Strait closure.
When will the Strait be reopened?
Unfortunately, this doesn’t seem to be an easily fixable problem, at this point.
U.S. officials have talked up the prospect of reopening the Strait of Hormuz by providing military escorts for tankers.
Many people point to the 1987-88 Tanker War, when the U.S. escorted Kuwaiti tankers in and out of the Strait.
But today is an entirely different beast.
In 1987-88, the U.S. escorted 188 tankers over 14 months.
Today, the U.S. would have to escort upwards of 50 tankers every day just to keep the oil flowing.
It appears that the U.S. Navy is not prepared to do this with its current assets in the region.
Getting more assets in place might take anywhere from a few weeks to a few months.
And it’s not entirely clear whether tankers will want to cross the Strait, even with a military escort.
In a note, JP Morgan analysts wrote:
“The U.S. alone cannot pivot away from this situation; it will require both Iran and Israel to agree. For example, Trump cannot claim a victory and walk away, as that would not guarantee safe passage for U.S. vessels, nor its allies.
“Iran seems to have expanded its conditions for a ceasefire from an ending of hostilities to now wanting an end to the American military presence in the Middle East, plus payment for rebuilding destroyed infrastructure.”
The analysts outlined their worst-case scenario:
“If the U.S. cannot achieve a short-term victory, it seems likely that it will be forced to attempt a ground war to reopen the Strait of Hormuz. If so, this could transform into a multi-year war if we use Russia/Ukraine as a proxy.”
“Iran is 2.7x larger than Ukraine, with a predominantly mountainous terrain, especially near the borders of the obvious U.S. entry points (Iraq/Turkey), though Iraq has blocked the U.S. from staging a ground assault from its territory.”
According to a report from Axios: “Iran may keep the Strait of Hormuz closed until a permanent peace deal is reached… even if Trump immediately withdraws forces… causing Middle Eastern officials to believe the oil crisis could continue for the next six months.”
Speculators on Polymarket think it’s unlikely a ceasefire occurs within six weeks - they give it a 40% chance.
Additionally, Polymarket speculators believe the chance of Strait of Hormuz traffic returning to normal by the end of April is just 28%.
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EVERYTHING YOU NEED TO KNOW ABOUT WHAT’S NEXT FOR OIL, RISK ASSETS AND CENTRAL BANKS (P2)
What’s next for oil and risk assets?
Brent crude oil has been settling around $100 in recent days.
According to most experts, this is the “Stagflation Zone”.
Should oil prices remain around this level for a prolonged period, we’d likely see elevated inflation + lower economic growth across the world.
A sudden spike in the price of oil acts like a tax on the global economy.
It quickly raises the cost of transport, manufacturing, food, materials, chemicals, and energy all at once.
It squeezes household spending as well as company profit margins.
Bloomberg analysts think crude oil prices could hit $140 in the event of a two-month Strait closure, and $160 in the event of a three-month closure.
According to Bloomberg energy columnist Javier Blas:
“My working assumption is that the oil market will add $3 to $6 a barrel to the headline price for every day - every single day - that the war continues."
Since the war started, the price of almost every global asset has fallen as oil prices have surged.
Although curiously, not Bitcoin and crypto - yet, at least.
This is an unexpected island of calm - with Bitcoin up a very impressive 17% since the war started.
Meanwhile, the S&P 500 continues to trade in almost perfect inverse lockstep with oil prices.
Oil up = stocks down.
Oil down = stocks up.
It’s almost impossible to know what happens next.
But if the Strait is not reopened soon, oil prices are likely to continue to rise, likely putting further pressure on risk asset prices.
Outlining his worst-case scenario, Ben Snider, chief U.S. equity strategist at Goldman Sachs, wrote:
“The major oil supply shocks of recent decades show the large potential downside risk in a severely adverse scenario. The S&P 500 declined by a median of 12% alongside rising oil prices during the oil price spikes in 1974, 1980, 1990, and 2022, and suffered a median peak-to-trough decline of 23% around those episodes.
"An equity market decline matching the most severe oil supply shocks in recent decades would reduce the S&P 500 level by 19% from current levels to 5400."
Overall, investors are still hopeful the situation will be fixed, but Barclays strategists wrote:
“Investors still believe in the ‘Trump put’, hence global equities are not down as much as in past oil shocks. But nervousness is growing by the day, and the longer the Strait of Hormuz stays closed, the more stagflationary markets will turn.”
What’s next for central banks?
In the U.S., market-derived inflation expectations have shot higher.
One-year inflation swaps have risen to 3%, from 2.2% at the start of 2026.
This means the market currently expects headline U.S. inflation to be 3% on average over the next 12 months - much higher than the current 2.4% CPI level.
So will the war and the energy price spike affect central banks' thinking?
We won’t have to wait long for the answer to that question - there’s plenty of central bank meetings this week.
The “Big Four” - The Federal Reserve, the European Central Bank (ECB), the Bank of Japan (BOJ) and the Bank of England (BOE) will all deliberate on interest rates this week.
“The longer this all goes on, with oil prices ratcheting up… the more nervous central bankers will be”, said Maury Obstfeld, former chief economist at the IMF.
And, as a preview, we saw another major central bank - the Reserve Bank of Australia (RBA) - hike rates by 25bps earlier this week.
This decision wasn’t solely due to the recent energy price spike - the RBA had already embarked on a hiking cycle in February.
But the RBA statement did mention that the Middle East conflict had caused “sharply higher fuel prices, which, if sustained, will add to inflation”.
Interest rate traders are already pricing in at least one rate increase from the ECB in 2026, with odds rising that the BOE’s next move will also be a hike.
The next move for the Fed is still widely expected to be a rate cut, but average expectations have been slashed from more than two cuts in 2026 to less than one cut in 2026 since the war began.
Wrapping up
There are so many unknowns here.
It’s really impossible to know what happens next.
But it is relatively clear that oil prices will likely continue to grind higher if the Strait of Hormuz remains closed.
And this is likely not good news for risk asset prices broadly.
But can bitcoin and crypto continue to outperform?
At this point, the Middle East situation has taken precedence over almost everything else.
The oil price holds the key to what’s next for global economies, global central banks, and risk asset prices.
MASSIVE SELL-OFF MOST INVESTORS MISS 👀
In today’s episode, we sat down with Steven Van Meter, President at Steven Van Meter Financial, to talk about why current moves could be an inflection point.
Here’s what you’ll hear:
- How trend-following CTAs hit trigger levels and scale selling from long to neutral, or even short.
- Why volatility-control strategies can add fuel as VIX rises, with ~30 as his rule-of-thumb trigger zone.
- How a Strait of Hormuz shock can lift oil, bump CPI, and squeeze consumers through weaker spending and margins.
- Portfolio Shield, an equity core with a dynamic Treasury hedge to limit downside and keep dry powder.
Hit play and see for yourself 👇️
YouTube | Spotify | Apple Podcasts
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BITE-SIZED COOKIES FOR THE ROAD 🍪
President Donald Trump is calling on the world to help reopen the Strait of Hormuz, including China. But China hasn’t fought a major kinetic war in nearly half a century, and there’s no sign it’ll get involved here.
Okta CEO Todd McKinnon is serving up the cold, hard truth on adapting to the world of AI: Not adapting likely means extinction for companies. He said: “You need to change probably 40% or more of what you're doing.”
U.S. Industrial Production posted its fourth straight month of gains in February, signaling a promising picture for American manufacturing. But this data point measures activity before the Middle East war began and energy prices rose.
Tax season is just around the corner. If you’re not sure how to go about it, SUMM is a tax software built specifically for crypto.
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