Look at what is underpinning the US dollar, plus almost no reaction in the US oil patch to the jump in oil prices.
April 7 (King World News) – Peter Boockvar: We of course wait to see what comes of the fresh ultimatum to the Iranians to reopen the Strait by Tuesday 8pm est (talk now also of a 45 day ceasefire that would include immediately open the Strait) but the weekend did see a pickup in the number of transits with an Iraqi ship going through, more from India and today I saw that some Japanese ships went through. Where Iran made a big mistake with effectively closing the Strait was the anger it engendered around the economic world (as we hear about more and more rationing going on of key things like jet fuel, fertilizer, aluminum, helium, naphtha, etc…).
And if it thinks that taking a toll on every passing ship is a good idea for them, you can be sure that over the next 3-5 year years, every country in the region is going to be building bypass options, like pipelines, rail, whatever, to other passage ways, to never have to rely solely on traversing the Strait again as the only option. Thus, if this regime will unfortunately remain in place, their desire for toll taking now will be the undoing of this in the years ahead and Iran will then have little to no economic leverage left with the only lever they can now pull.
Not having anything to do with the Strait closure in terms of shortages, I read this Bloomberg News article over the weekend from April 1st (h/t LG) that said “Almost half of the US data centers planned for this year are expected to be delayed or canceled. One big reason is the shortage of electrical equipment, such as transformers, switchgear and batteries. They are needed not just for powering AI, but also for building out the grid that is seeing increased consumption from electric cars and heat pumps. US manufacturing capacity for these devices cannot keep up with demand, and the scarcity has caused data center builders to rely on imports.”
And interestingly, “Electrical equipment adds up to less than 10% of the total cost of the data center, but it’s impossible to build the operation without it.” And yes, we get a lot of our electrical equipment from China. So, while tariffs were meant to encourage the production of more of it in the US or elsewhere, in the meantime it costs more to procure from China. Finally of note in the article, “The spike in demand from data centers and grid expansion have pushed up prices and extended delivery times to as much as five years. That is why some, like Crusoe (a data center builder), have even resorted to refurbishing old transformers from shuttered power plants as a stopgap measure.” I bring this up because almost half of the GDP growth of about 2% in 2025 was driven by data center construction.
There still is almost no reaction in the US oil patch to the jump in prices as seen with the crude oil rig count. It rose 2 rigs w/o/w to 411 but that is up only 4 since late February and still bouncing around the lowest level since September 2021.
It’s clear that drillers aren’t going to react until they see where prices settle out at. While the futures curve in any commodity predicts nothing other than what the market things today, the December WTI contract is trading at just $72 as of this writing vs the front month of around $110…
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Underpinning The US Dollar
Ole Hansen, Head of Commodity Strategy at SaxoBank: The Middle East conflict continued to underpin the dollar in the reporting week to Tuesday, 31 March. Broad-based weakness against the greenback drove a 55% increase in gross dollar longs against eight IMM futures, lifting the total to a four-month high of USD 11.6 billion, from a USD 19 billion short just before the war began.
Buying was most pronounced against the CAD and EUR. In the latter, the net position returned to neutral after reaching a three-year high less than two months ago – highlighting the speed and scale of March’s repositioning back into the dollar as geopolitical risk triggered widespread uncertainty across markets.
Elsewhere, the JPY short extended to a fresh 20-month high, while the AUD long reached a new 13-year high.
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ALSO RELEASED!
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The Gold Market Has Scary Parallels To Weimar Germany CLICK HERE.
Michael Oliver – Important Gold Update CLICK HERE.
The War Trade Is Back On CLICK HERE.
BUCKLE UP: This Will End In Total Collapse CLICK HERE.
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