Oil Prices to Spike This Summer as Strait of Hormuz Remains Shut

Summary

Oil prices are expected to spike again later this summer as inventories are depleted, with the Strait of Hormuz likely to remain shut for an extended period. Professor Steve Hanky believes Israel is acting as a spoiler, wanting to prolong the conflict with Iran and draw the US deeper in, while President Trump seeks to de-escalate due to economic damage. This shutdown is contributing to a commodity super-cycle, with many commodities, like steel, seeing significant price increases. Hanky argues that inflation is a monetary phenomenon, with the money supply, specifically M2, growing significantly, leading to inflation above the Federal Reserve's 2% target. He also notes the US equity market is in bubble territory, though predicting when a bubble will pop is nearly impossible without central bank tightening. The government's increasing deficit and debt servicing costs, particularly due to short-term debt rolling over at higher rates, create a "doom loop" scenario, potentially pressuring the Fed to monetize debt. Bank-created credit, not solely central bank actions, is the primary driver of money supply growth. Hanky also sees the AI boom as part of a current mania with significant overinvestment likely.