Thread by @KobeissiLetter

It's official:

The world is now experiencing its biggest energy crisis in history, with 600 MILLION barrels of lost oil supply.

US gas prices are up +47% since December and inflation is nearing 4% in a similar path to the 1970s.

What happens next? Let us explain.

(a thread)

Today marks day 51 of the Iran War.

With ~600 million barrels of lost oil supply, ~$50 billion ​worth of oil has been removed from the global market.

This is the same amount of fuel it takes to run the world's international shipping industry for 4 months.

Truly unprecedented.

And, the US actually has it good.

Jet fuel prices in Europe surged over +100% amid the Iran War's disruption.

New data shows Europe has just 6 weeks worth of jet fuel remailing with many flights set to be cancelled.

Europe is urging people to work from home to conserve fuel.

Asia has it the worst as they are heavily reliant on the Strait of Hormuz.

~45% of all oil and condensate imported by Asia flows through Hormuz, the highest of any region.

Asia relies on Hormuz for ~30% of gasoline and naphtha imports, ~9% of diesel, and ~5% of jet fuel.

The question now becomes: what does this mean for the economy over the long-run?

While energy inflation accounts for ~7% of US CPI Inflation, it also indirectly flows into many other categories.

New data shows that US energy inflation hit a +287% annualized rate last month.

Now, US CPI inflation has risen to 3.3%, the highest since February 2024.

Our models suggest US CPI inflation will top 3.5% by as soon as next month.

As a result, the UMich Consumer Sentiment Index fell to its lowest level on record, at 47.6.

The global economy has shifted.

As a result, Fed interest rate cuts are being priced-out.

There is now just a 22% chance of a Fed rate cut by July, down from 90%+ before the Iran War began.

The BASE CASE in market-implied futures shows no rate cuts in 2026.

Just months ago, markets saw 3+ cuts this year.

Sum this all up and we believe our view of "own assets or be left behind" has only strengthened.

The US is dealing with compounding inflation; 3%+ inflation on top of 4+ years of already high inflation.

This is why Wall Street is buying equities at the fastest pace since 2018.

Take a look at this chart:

Real wealth of the top 0.001% of US households has grown +3,500% since 1976.

Real wealth of the top 0.01% and 0.1% has surged +2,200% and +1,200%, respectively.

The average household? Just+200% growth.

Asset owners are the only winners.

Furthermore, amid the Iran War volatility, US AI and technology companies have only gotten bigger.

The Nasdaq 100's Forward P/E ratio has fallen from ~29x to ~22x in months, BELOW the 10Y average.

Nvidia and Microsoft are now HALF as cheap as Walmart on a Forward P/E basis.

There has arguably never been a market with more disruption than now.

For investors, this means more opportunity to capitalize on volatility.

Want to see how we are approaching it?

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Lastly, our view of "own assets or be left behind" is gaining popularity.

This is exactly why the S&P 500 just added +$7.3 TRILLION in 14 trading days.

The gap in the K-shaped US economy is only widening.

Follow us @KobeissiLetter for real time analysis as this develops.