We are seeing warning signs of soaring inflation as major shortages begin to be seen as escalation of military strikes continues.
Major Shortages As Escalation Spiral Of Military Strikes Continues
March 28 (King World News) – Peter Boockvar: We remain in this escalation spiral in terms of military strikes but with the unfortunate reality that the Iranian regime is not going to change, we are also seemingly days/weeks away from this being over. In part because instead of talking about price increases in a variety of key things, we’re now talking about Covid like shortages around the world that are hugely economically damaging.
Inflationary Impact
I do want to point out that part of the selloff in US stocks and Treasuries is not just due to worries about the growth and inflationary impact of what is going on but US markets are a source of funds for the rest of the world because of the huge amount of foreign ownership of US assets. According to the US government, the net international position of the US was -$27.55 trillion as of Q4 2025, meaning that foreign investors owned $27.55 trillion more of US assets than the US owned in foreign assets.
These numbers came out last week. See the chart below. Specifically, foreigners own about 30% of US marketable Treasuries and we also know that the Mag 7 stocks became also a reserve asset for them. These are now a source of funds for countries needing the money. We’ve already seen Turkey liquify thru a swap some of its gold holdings in order to buy lira to stem its fall. https://www.bea.gov/data/intl-trade-investment/international-investment-position
When it comes to sentiment, we are ripe for a big rally, upon the end of this, as seen with Friday’s close in the CNN Fear/Greed index which is down to 10. I believe it got as low as 3 in March/April 2020 in the teeth of you know what. https://www.cnn.com/markets/fear-and-greed?utm_source=hp
Germany Firing Up Coal Again?
Some more notable things I’m seeing in response to the war. Stupid is as stupid does is how it’s best described of Germany’s decision years ago to close its remaining nuclear facilities. Last Thursday I saw this Bloomberg News story, “Germany discusses firing up coal reserves to cut energy costs.”
Shortages And Price Increases
On Friday I saw a Reuters story titled “From beer to cosmetics, Asia feels full force of war fueled energy crisis.” They quote Choi Gun-soo, “the manager of a 57 year old South Korean factory that makes plastic films used by farmers to cover crops as well as by television manufacturers, said his suppliers were raising prices of some raw materials as much as 50%, while other suppliers had simply run out of stock.” He went on to say, “Since we’re out of raw materials for some products, we’ll have to gradually shut down the machines, and the next one to two weeks is likely to very critical.”
Most Acute Shortages Are In Oil Derivatives
More, and something I mentioned last week from a Nikkei News story, “The most acute shortages right now are in oil derivatives such as naphtha, sourced predominantly from the Gulf and used in refineries across Asia to make the plastics and other petrochemicals that go into almost every manufactured product.”
We also are hearing more stories about the growing helium shortage and what that means for semiconductor production. Directly impacting the AI buildout but a trend that was clearly in place before the war, the 5 yr CDS of Oracle further blew out Friday to 198 bps. Meaning that for $10 million of bond insurance, it now costs $198,000 to insure against it vs about $51,000 one year ago.
All Transit Through Strait of Hormuz Suspended
This is what Hapag Lloyd said Friday on their earnings call about what they’re seeing:
“We have suspended all transit through the Strait of Hormuz, also through the Red Sea, where we were actually getting closer to returning to the Red Sea. We’ve stopped all bookings from and to the Upper Gulf region, simply because we cannot move the boxes. We are adjusting our network. We continue to offer the connection from Asia to the Middle East, even if in some cases it now goes with a different routing. Costs are increasingly sharply. I mean, if we look at the impact that this has on us, then we talk easily about $40 million to $50 million per week that we are facing at this point in time, mainly related to bunker (fuel), but also insurance costs are up significantly and so are costs related to storage and in some cases, also inland transportation.”
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