MacroVoices #528 Luke Gromen: Hormuz Could Lead To a 1956 US Suez Moment

Luke Gromen identifies the Strait of Hormuz closure as the largest supply shock in the history of the oil market, with roughly 20 million barrels per day previously flowing through the strait now reduced to approximately 2 million barrels per day. What began as a conflict expected to last a weekend had, as of mid-April 2026, kept the strait effectively closed for roughly seven weeks. Tanker tracking data from Kepler, Tanker Trackers, and Bloomberg directly contradicts any narrative of recovering transit activity: pre-crisis volume ran 120 to 140 ships per day in both directions, but post-crisis counts peaked at only 16 ships on April 12th and fell to as few as 7 on the day of recording. No non-Iranian VLCCs have transited outbound since a brief three-VLCC movement tied to ceasefire news. The last successful outbound transit occurred on February 28th, meaning the physical supply disruption had not yet registered in markets at the time of recording because that cargo had not yet reached its destination.

The dislocation between physical and futures prices is already extreme. On Monday of the recording week, Brent futures traded around 100 dollars per barrel while dated Brent traded at 132 dollars per barrel, with physical delivered premiums running approximately 20 dollars above dated Brent, implying an effective delivered price near 150 dollars per barrel. The most extreme physical price observed during the crisis was a cargo delivered to Sri Lanka at 286 dollars per barrel. Rory Johnston noted this dislocation exceeded anything recorded during 2022, COVID, or any prior historical episode, against a backdrop where typical dislocations have historically been only a couple of dollars per barrel. WTI being priced far from Asian benchmarks has insulated the futures complex from the worst of this, but Johnston warned that if Hormuz remains closed another month he would be truly shocked if there were no material upgrade across the entire oil futures curve.

Gromen's worst-case scenario at the outset of the conflict was a US Suez moment analogous to 1956, when Britain and France were forced to abandon their Suez operation under US financial pressure. That scenario is now his base case. Most of Europe was unwilling to support the US in the Iran situation. Foreign central banks have not bought any net new Treasuries since 2014 and are slightly down in aggregate. A Federal Reserve white paper from October 2025 found that 37 percent of net issuance of US Treasury notes and bonds over the last four years came from the Cayman Islands, heavily through US hedge funds via the Treasury basis trade on extreme leverage. Gromen argues Treasuries have shifted from patient foreign insurers and central banks to highly leveraged funds that sell when risk goes off, making the bond market structurally more fragile precisely when it faces the most stress.

On the geopolitical intelligence picture, Gromen says the US Embassy in Riyadh was hit harder than officially admitted, with Iranians precisely targeting the CIA section. The US Fifth Fleet base at Bahrain was hit hard and approximately 1,500 personnel were evacuated rapidly back to the US. Russian targeting assistance to Iran was reported relatively early. Gromen concludes that if Iranian strikes penetrated air defenses at the embassy and the Fifth Fleet base, transiting ships through Hormuz would be even more vulnerable, and the real reason Hormuz is closed is that crews do not want to risk being blown up. Iran's Wednesday proposal to allow ships to pass on the Oman side was conditioned on the US respecting Iran's right to continue enriching uranium, which Gromen reads as bringing negotiations back to square one. Iran simultaneously threatened to use the Houthis to close the Strait of Bab el-Mandeb, a threat that received far less press coverage than the peace offer. Closing both straits simultaneously would, in Gromen's words, be lights out for the global economy.

The fertilizer dimension is what Gromen identifies as the most severe humanitarian risk. Synthetic nitrogen fertilizers support a world population that would otherwise fall from 7.5 billion to 3.9 billion without them. The northern hemisphere growing season creates a hard deadline making late delivery useless, and the Trump administration's removal of E-15 ethanol limits could divert more of the US corn crop to fuel, further tightening global corn markets. Gromen predicts starvation in the poorest parts of the global South later in the year and pronounced food inflation across richer countries.

US true interest expense including net interest plus veterans affairs through March equals 102 percent of federal receipts six months into the fiscal year. Gromen's macro sequence runs as follows: an oil and food spike drives a slowdown or recession, government receipts fall below interest and entitlement obligations, and the government faces a binary choice between printing money or defaulting. He assigns zero probability to default. Until money printing actually occurs, the market environment can feature dollar up, rates up, and everything else down. Gromen identifies 4.4 to 4.5 percent on the 10-year Treasury yield as the threshold Bessent and Trump appear to be defending, and characterizes Bessent's 15 billion dollar single-day Treasury buyback as active market management. On positioning, Gromen is sitting in cash and gold waiting for a clear quantitative easing signal, with his cleanest fundamental plays being energy, uranium, domestic electrical infrastructure, and gold.