Dealing With The Major Disruptions Caused By The War In Iran
Inside today’s Daily Journal…
Essay: The Worst Is Yet To Come
No off-ramp from war and high energy prices
War + midterms = lower equity prices
Inflation likely to inch up
Chart Of The Day… 2026 energy theme
Today’s Mailbag
The first casualty of any war is the truth.
You cannot rely on what the government will tell you about the war with Iran. The markets are going to be the better barometer of how the war is going. And, according to the markets, the Persian Gulf isn’t going to be open for business any time soon.
Please don’t doubt my patriotism or claim that I hate U.S. President Donald Trump. Neither is correct. My wife and I have spent time with President Trump at Mar-a-Lago. Trump and I have several mutual friends. I supported his candidacy – and I sorely wish he had delivered on his promises of no more foreign wars and a vastly smaller government (DOGE).
I love our country and I hope for the best outcome of this conflict. It would be an incredible step forward for world peace if the terrorists in Iran could finally be vanquished. Unfortunately, hope isn’t a strategy.
I’ll tell you more about my theory of this conflict below.
But first let me explain what the media won’t say about what’s happening to the markets.
On Friday, I provided a strategy for dealing with the inevitable volatility: raise cash. If you want to reduce your portfolio’s volatility, I recommend selling “bonds” (including our property and casualty insurance company stocks) to raise more cash. Additionally, I recommended four stocks to hedge against higher energy prices – Venture Global (VG), Frontline (FRO), APA Corporation (APA), and Glencore (GLNCY).
But this approach only deals with the headline risks: higher energy prices. There’s far more at stake in the Strait of Hormuz than only energy.
Qatar produces approximately 40% of the world’s helium. Helium is a byproduct of natural gas processing. It is essential for cooling the superconducting magnets in MRI machines and the manufacturing of semiconductors. If the Strait of Hormuz remains closed for months, global semiconductor fabrication will grind to a virtual halt.
Roughly 45% of the world’s sulfur is sourced from the Persian Gulf. Sulfur is the critical input for creating sulfuric acid, which is required to process phosphate ores into fertilizers. Without it, phosphate cannot be made soluble for plants.
And speaking of fertilizer, 33% of the world’s urea (the most common nitrogen fertilizer) flows through the Strait of Hormuz. If it remains closed, food prices will spike higher.
Only slightly less urgent, the region is also a major producer of aluminum. Smelters in the region depend on the Strait for both the export of finished metal and the import of alumina (mostly from India).
And finally… the region is a dominant exporter of ethylene and polyethylene. These chemicals are the raw materials of the modern world, from sterile medical packaging to automotive components and consumer plastics. They are produced by “cracking” oil in the Persian Gulf.
How will we solve the helium problem – the most critical and immediate problem of those mentioned above?
