MacroVoices #537 Brent Johnson: There’s No Turning Back

Brent Johnson views the Iran ceasefire as a temporary pause rather than a resolution, estimating the truce could last anywhere from two more hours to two months, with two months being optimistic. The memorandum of understanding is written ambiguously enough that each side will interpret it according to its own interests, and Johnson does not expect the US, Iran, or Israel to fully honor their commitments. Both the Iranian and US versions of the MOU describe a $300 billion figure, not the $300 million Trump publicly cited, and both specify that weapons-grade uranium would be down-blended on-site rather than physically removed from Iran, a condition Israel has explicitly rejected. The Strait of Hormuz remained closed as of the recording date despite Trump announcing ships could transit the following day, and Iran's parliament speaker announced after the interview that the Strait will never return to its pre-war situation and that Iran claims the right to charge transit fees.

Johnson argued that if the US retreats to the Western Hemisphere while Iran retains nuclear material and controls the Strait with fees, that outcome would represent a major Iranian victory and a significant US defeat. He said the full economic impact of the three-month Strait closure will not be realized for three to six months, possibly nine months, pointing to Q4 and Q1 as the window when consequences become apparent. A particularly underappreciated second-order effect is agricultural: many ships failed to transit during the planting season, disrupting fertilizers, chemicals, and other crop yield inputs, making a food supply tightening in Q4 or Q1 more probable than it would otherwise have been.

Despite the negative read on the deal's durability, Johnson identified several strategic gains for the United States. Russia and China did not come to Iran's rescue, which he described as strategically valuable information. Gulf countries grew closer to the US as a result of the conflict. The US demonstrated the capability to close the Strait of Hormuz, strengthening its negotiating leverage globally. A number of large long-term energy contracts have been signed over the last four months, with the first major one around February 26th and another signed with Japan approximately four or five days before the recording.

On markets, crude oil fell from the $90 level to the $73 handle following the peace deal announcement, a decline of close to 20 percent, while gold rose approximately 4.5 percent to $4,321 and the S&P 500 climbed over 2 percent to $7,420 on de-escalation. Erik Townsend retracted his prior prediction of oil reaching $150 to $200 by year end, citing China's Strategic Petroleum Reserve capacity as a buffer, though he still expects oil to fill a chart gap around $84.50 and anticipates upside retracement once physical shortages and potential re-escalation are recognized. Patrick Ceresna attributes the large downside move in crude to forced flows including margin calls, stop losses, and CTA flips, and expects prices to settle back above $80 and possibly as high as $90 once forced liquidation unwinds. US commercial inventories have been drawn down to operational minimums and the Strategic Petroleum Reserve is at its lowest level since 1983, with the president acknowledging approximately four weeks of stocks remaining before depletion.

Johnson's broader thesis is that the world has crossed a threshold into de-globalization with no realistic path back to the rules-based international order, even if political control in Washington changes hands. He draws a parallel to the fall of the Roman Republic and warns that prolonged back-and-forth political swings historically produce a strongman outcome rather than a restoration of the prior system. He views the more likely outcome of the current fourth turning as a transition of the United States from a republic to an empire rather than the rise of a rival foreign power, and believes nationalism, once it begins, tends to persist for a long time.

Johnson's milkshake theory holds that de-dollarization is largely a myth, noting that FX turnover, cross-border lending, and trade invoicing in dollars are all at or above levels seen 30 years ago, and that foreign holdings of US financial assets have nearly doubled since 2018. He argues stablecoins will solidify dollar dominance, pointing out that 99 percent of all outstanding stablecoins globally are US dollar stablecoins. He also contends the dollar can be weaponized by engineering a dollar shortage, citing Treasury Secretary Scott Bessent explicitly stating the US used its tools to create a dollar shortage in Iran, producing currency collapse and domestic protests. Johnson predicts countries holding gold as a reserve will ultimately sell it when they need dollars, citing evidence that from the outbreak of the Iran war to the point a deal appeared near, gold fell 20 percent as Russia, Turkey, and Gulf States sold gold to obtain dollars to buy oil.

Johnson identifies national defense as likely one of the largest investment opportunities in a generation, arguing every country will be compelled to rearm regardless of fiscal capacity, and flags the MRO sector as an underappreciated supply chain vulnerability. The FOMC dot plot under new Fed Chair Kevin Warsh already anticipates a rate hike is more likely than a cut as the first policy move. Ceresna notes gold has not yet shown a bullish pivot in trend and expects a new gold bull market to align more closely with a pivot in rates and inflation expectations.