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

Brent Johnson believes the US-Iran ceasefire will last only weeks or months at best. He argues the MOU text is written ambiguously enough that each side will interpret it to suit its own interests, and neither will fully honor what the other believes was agreed. Trump appears to have chosen periodic prevention of Iranian nuclear progress rather than a definitive resolution. The MOU specifies down-blending of weapons-grade uranium on site rather than physical removal, which directly contradicts Israel's stated condition for standing down. Both versions of the MOU also specify that the Strait of Hormuz will be toll-free for only 60 days, after which Iran retains control and charges user fees of roughly one dollar per barrel, equating to approximately two million dollars per VLCC transit. Iran's parliament speaker has stated the strait will never return to its pre-war situation.

Following the peace deal announcement, crude oil collapsed from the 90 dollar level to the 73 dollar handle, a decline of close to 20 percent, gasoline fell to 2.78 dollars per gallon, gold pushed approximately 4.5 percent higher to 4321 dollars, and the S&P 500 climbed over 2 percent to 5420. Johnson attributes the oil selloff to forced flows including margin calls, stop losses, and CTA flips rather than fundamental deterioration. He argues that draining roughly 20 percent of world oil reserves makes a sustained sub-70 dollar price structurally unlikely and expects oil to settle back above 80 dollars and possibly reach 90 once forced liquidation unwinds, with chart gaps pointing to 85 and a potential return above 100 before year end. Townsend withdrew his prior prediction of oil reaching 150 to 200 dollars by year end, citing changed facts, while noting speculative selling could overshoot before any rebound. He flagged that US commercial inventories have been drawn to operational minimums and the Strategic Petroleum Reserve is at its lowest level since 1983, with approximately four weeks of stocks remaining.

The Strait of Hormuz has already been closed for approximately three months and Johnson expects the full economic impact to emerge over three to six months, possibly nine, pointing to Q4 2025 and Q1 2026 as the period of peak effect. A second-order risk is food supply disruption because ships did not move fertilizers and chemicals during the planting season, with agricultural tightening potentially emerging into Q4 and Q1. Ceresna's Trade of the Week reflects this view: a bull call spread on DBA, the Invesco DB Agriculture Fund, buying the January 15 2027 27-strike call for 1.70 and selling the 30-strike call for 0.80, for a net debit of 0.90 on a 3-dollar-wide spread with a maximum payoff of 2.10 and downside limited to the premium paid.

Johnson identifies several strategic gains for the United States from the conflict. The episode confirmed Iran has missile capabilities capable of reaching Europe. Russia and China did not come to Iran's rescue. Gulf countries have grown closer to the United States. By closing the strait the US placed the rest of the world under extreme pressure, strengthening bilateral negotiating leverage. Iran was previously exporting oil to China at a 20 to 30 percent discount in yuan. If Iran now exports at full price in dollars, China loses access to that discounted supply and must compete on the open market.

Johnson's milkshake thesis holds that de-dollarization is largely a myth. FX turnover, cross-border lending, and trade invoicing are all as high or higher than 30 years ago, and financial assets held by foreigners in the United States have nearly doubled in the eight years since analysts first predicted the milkshake era was ending. Dollar reserves have fallen mainly versus gold, not versus other fiat currencies. Johnson sees stablecoins as entrenching rather than undermining dollar dominance, noting 99 percent of all outstanding stablecoins globally are US dollar stablecoins driven by market demand. As citizens worldwide choose dollar stablecoins over local currency, monetary sovereignty effectively transfers to Washington.

Johnson frames the broader context as a structural shift from a rules-based multilateral order to an America First bilateral approach. He argues this will not change dramatically even if Trump is no longer president and draws a parallel to the fall of the Roman Republic, which unfolded over roughly 70 to 80 years and ended not in collapse but in the rise of empire under a strongman. He predicts the US will not be replaced by a foreign power but will transition from a republic to an empire, and acknowledges he could be wrong while noting real people will pay the price through more wars and non-cooperation.

The FOMC dot plot under new chair Kevin Warsh already anticipates a rate hike is more likely than a cut as the first policy move, contrary to market assumptions at the time of his appointment. Johnson flags the risk the Fed may hike rather than cut at the September meeting. Gold has bounced from oversold conditions but has not achieved a bullish trend pivot, with the 50-day moving average declining just above the 4400 level, and Johnson cautions it may retest prior lows before a new bull market develops. Uranium stocks remain in a distribution cycle with all rallies met by ample supply, and Johnson expects summer doldrums to persist before a potential pickup ahead of the World Nuclear Association Conference in London in early September.