Keep pulling the thread on Michael Every.
The effective closure of the Strait of Hormuz has removed 13-15 million bpd of oil production from the market, leading to the fastest drawdown of global commercial inventories on record. While some experts believe mitigations have reduced the net deficit to 3-4 million bpd, the physical constraints and the long timeline required to restart production present a severe risk to the global economy.
The episode posits that the US is moving away from traditional, demand-focused economic policy towards 'economic statecraft.' This new paradigm involves using financial instruments like Federal Reserve swap lines and stablecoins as tools of national and geopolitical strategy, prioritizing the rebuilding of the physical and industrial economy over purely financial concerns.
A key debate is whether the oil shock will ultimately be inflationary or deflationary. While higher energy prices are initially inflationary, an extreme spike could trigger massive demand destruction, leading to a deflationary collapse and forcing aggressive monetary easing from central banks ill-equipped to handle supply-side shocks.
The crisis is accelerating a reshuffling of global alliances. This is evidenced by the UAE leaving OPEC+ and receiving a Fed swap line, Trump's direct intervention in Israeli-Hezbollah actions, and speculation about a potential US-China alignment against Iran to resolve the crisis.