Bravos Research breaks down why oil crashing while the Strait of Hormuz stays closed is one of the strangest signals in years, and what it is actually telling us about the financial system.
Key Points
Key Highlights:
- Oil is down nearly 40% yet the Strait of Hormuz is still barely open, something that has never happened before because the supply problem that caused the spike has not been fixed
- At the same time stocks, gold, silver, and Bitcoin all fell together, when every asset class drops at once it usually means one thing is behind all of it
- That one thing is the US dollar, every single one of these assets is priced in dollars and when the dollar gets stronger they all get cheaper almost automatically
- The Fed controls the dollar by setting interest rates, when rates go up the dollar strengthens and everything falls, when rates come down the dollar weakens and everything rallies
- The good news is that bond markets are not pricing in serious inflation despite the oil shock, meaning the Fed may not need to hike much further from here
Takeaway Nothing is broken in the traditional sense but the usual rules stopped working, oil falling while supply stays tight is a warning that the dollar is quietly running the show right now. Watch the Fed not the headlines.
