🥛 When will the war end? ⏳

GM. This is Milk Road Macro, the newsletter that helps you understand the global economy before your brokerage account starts screaming for help.

Here’s what we’ve got for you today:

✍️ How is the Iran war affecting economic data and when will the conflict end?
🎙️ The Milk Road Macro Show: The #1 Real-Time Indicator That Says the Economy Is About to Boom w/ Craig Fuller.
🍪 BlackRock President said investors may be underestimating Iran war risks

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HOW IS THE IRAN WAR AFFECTING ECONOMIC DATA AND WHEN WILL THE CONFLICT END?

The Iran war is still the number one factor affecting asset markets across the globe.

The longer the conflict lasts, the more global economic damage will be done.

As the vital Strait of Hormuz remains clogged with virtually no tanker traffic, crude oil and other energy prices continue to creep higher with every day that passes.

And risk assets like stocks and Bitcoin continue to creep lower.

This dynamic will likely continue to intensify as long as the Strait remains closed.

So what’s the latest?

How is economic data being affected?

And, crucially, how much longer will this go on?

Let’s take a look…

What’s the latest?

Things have become a little bit clearer in recent days.

It appears that the two sides are in “negotiations” of sorts - but via third-party mediators, reportedly including Pakistan.

The U.S. set out a “15-point plan” to end the conflict.

This included a 30-day ceasefire, a reopening of the Strait of Hormuz, a dismantling of all nuclear facilities in Iran, and a stop to Iranian attacks on Gulf energy infrastructure.

Iranian officials then appeared to publicly reject this American plan.

They laid a “5-point plan” of their own, including the establishment of “concrete guarantees” against future attacks on Iran, “guaranteed payment” for war damages, and international recognition of Iran’s “authority” over the Strait of Hormuz.

Meanwhile, thousands of elite U.S. Army Airborne soldiers and Marines are en route to the Middle East.

It’s looking likely that, if the U.S. wants to escalate the war, troops might attempt to invade and control Kharg Island.

The Pentagon is “developing military options for a final blow in Iran that could include the use of ground forces and a massive bombing campaign”, according to an Axios report.

Kharg Island is a small and highly strategic island near the Strait of Hormuz that will likely need to be captured if the U.S. wants to reopen the Strait by force.

It’s also a vital cog in Iran’s oil export infrastructure.

Source: Bloomberg

Iran’s parliament speaker responded to a potential invasion of Kharg Island by threatening that "all the vital infrastructure of that regional country [which assists] will, without restriction, become the target of relentless attacks”.

An Iranian military source also threatened to close another vital shipping Strait, the Bab al-Mandab Strait near to the Red Sea, "if the enemy wants to carry out an operation in the territory of the Iranian islands”.

Maritime disruption around the area of the Red Sea would likely pile even more upward pressure onto oil and gas prices.

How is economic data being affected?

Because the war started in late February/early March, we haven’t really seen much economic data covering the period of conflict.

The fun might begin in the next couple of weeks when important global data for March begins rolling in.

However, this week we did see the S&P Global flash PMIs for the U.S. in March - one of the earliest data points available.

This is a survey-based gauge of economic activity (services and manufacturing) in America.

And the PMI for March signalled an unwelcome combination of slowing growth and rising inflation.

According to Chris Williamson of S&P Global, this latest survey is “indicative of GDP rising at an annualised pace of just 1%, and consumer price inflation accelerating back to around 4%.”

The PMI fell to its lowest level in a year.

Source: S&P Global

While measures of prices rose across the board.

Source: S&P Global

The national average of gasoline prices is now up exactly $1.00 (34%) since the war began, according to Jim Bianco of Bianco Research.

Source: Bianco Research

There’s also been a big impact on air travel, as the price of jet fuel soars.

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HOW IS THE IRAN WAR AFFECTING ECONOMIC DATA AND WHEN WILL THE CONFLICT END? (P2)

Fares across seven popular Asia-Pacific to Europe routes are averaging about 70% higher than a year ago, according to Bloomberg.

And lasting damage may have already been dealt, with experts predicting that global airfare prices may remain about 30% above last year’s levels even as far out as October.

Source: Bloomberg

Due to the building inflationary pressures, interest rate traders are now rapidly pricing in a growing probability of zero Federal Reserve rate cuts in 2026.

According to Wells Fargo analysts:

"The market just experienced [one] of the most extreme Fed expectation shifts of the past 20 years".

Source: Wells Fargo

Earlier this year, the market had been expecting more than two Fed rate cuts in 2026.

So when will this end?

While Iran has so far effectively weaponised the Strait of Hormuz as a big piece of leverage, the incentive to keep the Strait closed likely won’t last forever.

There will probably come a point where the leverage mostly disappears, as widespread and lasting global economic damage sets in.

But Iran will likely want to hold out for as long as possible.

According to Marko Papic at BCA Research:

"I am not sure that it is in Tehran's interest to hold out forever. If they usher in a 1970s-style global recession, the ‘gloves are off.’ They too have an interest in negotiating somewhere within the Area N. As close to R Point as possible, YES."

Source: BCA Research

So, how close are we to the “R Point” right now?

I don’t know - it’s very tough to gauge.

But I think we’re probably closer than many people realise.

Meanwhile, on the U.S. side, there are also big incentives for President Trump to find a swift exit.

According to several polls, a minority of Americans support the war in Iran, and an even smaller portion would support “boots on the ground”.

Similarly, according to a Reuters/Ipsos poll, only 29% of the country approves of President Trump’s economic stewardship, with this number cratering in recent weeks.

This is the lowest rating in either of Trump’s terms and lower than any rating under Joe Biden.

Source: Reuters

And we know President Trump uses financial markets as a gauge of success.

It was a bond market freak-out that sparked the swift tariff U-turn following “Liberation Day” in April 2025.

Back then, Trump said bond markets were “yippy” as he pulled back on massive global tariffs.

And they’re getting “yippy” again, with the 10-year Treasury yield quickly marching up from 4% to 4.4% since the war began (meaning Government borrowing costs are increasing).

Source: TradingView

Deutsche Bank’s “Pressure Index” is currently surging and is well above where it was in April 2025.

This index measures the 20-day change of the S&P 500, the 10-year Treasury yield, Trump’s approval rating, and one-year inflation expectations.

Source: Deutsche Bank

Wrapping up

As I keep writing in these newsletters, nobody knows what will happen next.

I’m certainly not going to pretend that I do.

But the severity of a prolonged closure of the Strait of Hormuz is becoming clearer.

We’ll start to learn what economic damage has already been caused in the coming weeks as detailed data for March starts to roll in.

And the longer the Strait remains closed - the worse things will get, this is almost inevitable.

There are big incentives on both sides of the conflict to bring about a swift end to this mess.

But the road to get there looks about as clear as mud right now.

Unfortunately, an end doesn’t appear to be imminent right now…

THE #1 REAL-TIME BOOM SIGNAL 📈

In today’s episode, we sat down with Craig Fuller, founder/CEO of FreightWaves, to talk about what high-frequency freight data says about the U.S. economy.

Here’s what you’ll hear:

Why crude and diesel spikes may be short-term noise, with fuel surcharges passing most costs to shippers.
Tender rejections as a freight thermometer, rising from about 4% to about 14%, hinting at rate pressure.
A flatbed freight surge suggests an industrial rebound, tied to heavy materials, manufacturing, and data centers.
How enforcing non-domiciled CDLs could pull up to 200k drivers, tightening capacity and fueling a supercycle.

Hit play and see for yourself 👇️

YouTube | Spotify | Apple Podcasts

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