Maybe… just maybe the Trump administration isn’t crazy.
The media and social media are awash with claims that the Trump administration has made a crucial mistake with the conflict in Iran… that this excursion will destroy the “petrodollar” and that the U.S. has failed miserably in its military efforts.
I don’t see how any of this is remotely correct. It anything these claims seem to be coming from people who don’t even understand the basics of Iran, the Strait of Hormuz, or the financial system. Either that or they simply hate the U.S or the President and only see things through the lens of “the President messed up.”
For one thing, the U.S. has effectively neutralized Iran’s military in a matter of weeks. Sure, Iran can fire off missiles and drones here and there, but the country has no central leadership, no navy, no submarines, and little if any air defense systems. The few individuals who are firing missiles are disconnected, hiding in underground bunkers, and have little if any political power.
As for the Strait of Hormuz… closing it hurts Asia a lot more than the U.S. or Europe. Europe gets only 3.8% of its energy supplies from that route. The U.S. gets even less at 2.5%. But 89% goes to Asia and much of it, China. Yes, higher oil prices caused by the Strait closing are problematic for the global economy. But this is NOT the oil-mageddon everyone keeps making it out to be.
As Avi Avidan notes, the U.S. has already ramped up its oil exports to 4.9 MILLION barrels of oil per day. This alone covers 23% of the Strait’s traffic. Other major oil producers (Saudi Arabia, the UAE, etc.) are shifting to alternate shipping routes/ pipelines. There will be short-term pain, but by the time the situation is resolved, Iran will have been reduced to a secondary player on the global energy stage, and the world will not be as reliant on the Strait for energy supplies.
Which brings us to claims that the petrodollar is dead.
This is hands down one of the DUMBEST arguments ever made. The U.S. just neutralized a major military power in less than a month… and somehow this is the end of the empire and the Middle East is going to start selling oil denominated in another currency?
For one thing, the $USD comprises over 90% of the global currency markets. What is going to replace it? The Euro? The Yuan? No one, not even the Chinese want Yuan: it accounts for less than 9% of the global currency transactions. And some 34% of Chinese debt is denominated in… U.S. dollars.
Put simply, if someone tells you “the $USD is dead” or “this is the end of the petrodollar” they are actually telling you, “I have no idea what I am talking about and have not even bothered to spend 5 minutes researching this subject.”
So again… maybe the Trump administration isn’t crazy. Maybe they just crippled two of China’s biggest energy sources (Venezuela and Iran) while simultaneously demonstrating that China’s most advanced military technology is a joke (guess who supplied Venezuela and Iran with the technology that the U.S. rendered useless within hours?).
I know this doesn’t fit the narrative of the U.S. is in decline, but then again, people have been pushing that narrative for literal decades.
The reality is that had you paid attention to the facts and done the research, you could have made a TON of money from this recent episode in the markets. Heck, stocks alone have rebounded to within spitting distance of their all-time highs. Anyone who bought the lows (our clients did) has seen extraordinary returns.
On that note, we just published a Special Investment Report concerning FIVE secret investments you can use profit from the next major bull run in precious metals miners.
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Best Regards
Graham Summers
Chief Market Strategist
Phoenix Capital Research
