The blockade of the Strait of Hormuz is creating a supply crisis that markets are severely underestimating. This time, conventional safe-haven logic may completely fail.
In a recent discussion on March 13, Amrita Sen, Founder and Director of Market Intelligence at leading energy consultancy Energy Aspects, and Jeff Currie, Chief Energy Strategist at Carlyle, pointed out that the current situation is a "mirror image" of the COVID-19 pandemic. Then, demand abruptly evaporated; now, supply is experiencing massive disruption. The scale is similar, but the direction of the shock is opposite.
Both experts believe financial markets remain in a state of collective denial. Equity markets are severely lagging in their reaction to the supply shock. Meanwhile, central banks, facing dual pressures of a contracting credit pool and economic slowdown, will find it almost unavoidable to eventually resort to quantitative easing (QE).
More notably, within this framework, gold is not an ideal hedge—at least until QE is actually implemented, gold faces selling pressure rather than buying interest.
Currently, Poly Market assigns a 98% probability that the Strait of Hormuz will remain closed until the end of March. Jeff estimates that even if strategic petroleum reserves (SPR) are released at a maximum rate of 2 million barrels per day, the cumulative lost oil supply by the end of March would still reach approximately 450 million barrels. This supply is "gone forever." Concurrently, a German government bond auction has already failed, the US mortgage market is under pressure, and the global credit pool is contracting.
**Market Denial: Waiting for a Reversal That Won't Come**
According to Jeff, the root of the financial market's sluggish reaction to the supply shock lies in a deep-seated psychology of "denial"—markets never truly believed the Strait of Hormuz would close, and even now that it has, they still believe former President Trump can ultimately reverse the situation.
"Markets believe Trump can perform a 'taco'—take a position and then reverse it—and everything will be fine," Jeff said. "He's done it with tariffs and other issues. But the opening or closing of the Strait of Hormuz isn't a 'taco' issue—it's a binary KPI."
Amrita cited a judgment from a senior industry figure, pinpointing the fundamental flaw in this logic: "Everyone says the Strait can't be closed for a month because it would destroy the world economy. But this logic is completely inverted—the forces deciding whether the Strait is open or closed don't care about the world economy; they care about survival."
This denial has historical precedent. Jeff recalled that during the initial outbreak of COVID-19, when the world's second-largest economy essentially shut down, oil prices remained stubbornly around $58. Market denial lasted about six weeks before prices collapsed precipitously. "I think it's the same situation now—denial, denial, denial, and then a sudden cliff."
From an asset structure perspective, the potential impact of this crisis on US stock markets is highly asymmetric. The market capitalization of energy companies in the US is about $2 trillion, accounting for roughly 3% of the market. In contrast, sectors benefiting from low oil prices—such as airlines, consumer goods, and manufacturing—have a combined market cap exceeding $30 trillion. Jeff characterizes this as "a massive short of $2 trillion against $30 trillion" and explicitly stated he is already shorting airline stocks.
**Central Bank Dilemma: Inflation vs. Recession, QE Might Be the Only Way Out**
Faced with the dual challenges of inflation pressure from the supply shock and economic downturn risks, central banks have extremely limited policy space.
Amrita noted a clear divergence with macro research teams: the latter tend to believe central banks will "turn a blind eye" and cut rates to support growth. However, her own judgment is that the energy price shock is persistent, and cutting rates under these circumstances would be like drinking poison to quench thirst.
Jeff fully agreed, citing the historical lesson from the 1970s—when central banks followed inflation with rate hikes, they made the situation worse. He believes that this time, central banks might even ultimately resort to QE.
The core logic driving this judgment lies in the structural contraction of the global credit pool. In his research report "The Crude Awakening," Jeff points out that since the US and Europe froze Russian central bank assets in July 2022, oil-producing nations have stopped recycling petrodollars back into Western capital markets, instead buying gold in large quantities. The breakdown of this mechanism means the easing effect of "high oil prices equals QE" seen in the 2000s is gone—rising oil prices no longer bring liquidity supplementation, leaving only inflation pressure.
Now, the Hormuz blockade further severs the ability of Gulf Cooperation Council (GCC) countries to inject capital into global markets. Failed German bond auctions and pressure on US mortgage products indicate an accelerating credit contraction. "What's the solution? Expand the credit pool, inject money into the system via QE," Jeff said. "But the result of that is further driving up the prices of commodities like food and fuel."
**Gold: Why It's Not the Hold Now**
In the current market environment, gold is typically seen as the prime hedge against geopolitical risk and inflation pressure. However, Jeff explicitly stated he is currently cautious on gold, based on a clear logical chain.
Funding pressure triggers selling. When a supply shock causes economic contraction and tighter credit conditions, the primary concern for governments and institutions is not wealth preservation but funding. During a liquidity crisis, gold is often the easiest asset to liquidate, thus facing selling pressure first. Jeff cited Poland's recent announcement to sell part of its gold reserves to cover expenses as a real-world confirmation of this logic.
Before QE is implemented, gold lacks an upward catalyst. Jeff's core judgment is that the real buying opportunity for gold comes *after* QE is launched, not before. He cited the market movement during the COVID-19 pandemic—in March 2020, the market first experienced a severe liquidity crisis, during which gold was also sold off. It wasn't until the Fed announced unlimited QE on March 23 that gold took off, beginning a strong rally.
"The real logic is: you want to be short gold *before* you see QE, and then go long *once* QE starts," Jeff said.
The broken petrodollar recycling mechanism means gold has already front-run gains. Jeff noted that the trend of oil producers shifting petrodollars into gold since July 2022 has already been a major driver behind gold's significant price increase. From July 2024 to now, gold has rallied approximately 112%. In his view, this rally has already significantly priced in geopolitical premium and de-dollarization logic, making the risk-reward ratio at current levels less attractive compared to other commodities.
Other commodities offer more direct exposure. Compared to gold, Jeff prefers holding industrial commodities like Brent crude, copper, and aluminum. He believes copper's strategic role in renewable energy and "secure energy" infrastructure is irreplaceable, with a clear and persistent thesis. Brent crude directly benefits from supply disruption and avoids the policy intervention risks facing WTI. "I'm bullish on all commodities except gold," Jeff stated, "and I think this persists—similar to the 1970s, where the short opportunity didn't really emerge until '85, '86."
Overall, Jeff's advice is to remain观望 or even short gold until clear QE signals appear, and only then incorporate gold into a long portfolio. This timing judgment is the most critical, yet often overlooked, part of the current gold trading logic.
**Not a Short-Term Trade, but an Era Restructuring**
Both Jeff and Amrita emphasized that the current situation should not be viewed as a short-term shock awaiting a "solution," but rather a deep institutional shift (regime shift).
Jeff compared it to the historical juncture after 9/11: 9/11 ended the dot-com bubble and, through a series of geopolitical maneuvers, indirectly facilitated China's WTO accession, thereby launching the 2000s commodity supercycle. He sees the current asset rotation as highly similar—physical assets, heavy assets, and low-obsolescence assets (which he terms "HALO" assets) will systematically outperform financial assets.
Regarding the US-China dimension, both believe China holds a more advantageous position in this crisis. China possesses substantial strategic reserves, has banned exports of refined products, and continues to steadily absorb 1.5 to 2 million barrels per day of oil from inside the Strait of Hormuz. "When he meets with Trump at the end of the month, we'll see who really has more leverage," Jeff said.
Amrita pointed out that even if the Strait of Hormuz eventually reopens, shipping will not return to its previous state—longer detours, higher insurance costs, and crew safety concerns will permanently alter the structure of the global energy supply chain. "The new normal will be starkly different from the old normal," she said.
Regarding investment strategy, Jeff's overall framework is to go long high-volatility assets, hold instruments with direct exposure to price volatility, and build a diversified, cross-market commodity exposure. Specifically, Brent crude and copper are his most confident long positions; airline stocks are a clear short; WTI should be avoided due to high policy intervention risk; and gold should be entered only after QE signals emerge.
**Summary of Investment Views:**
* **Brent Crude:** Clear long, consider leveraged exposure via rolling front-month contracts. * **Industrial Metals (Copper, Aluminum, etc.):** Clear long, especially bullish on copper. * **Agricultural/Food Commodities:** Bullish. * **Airline Stocks:** Short. * **WTI:** Cautious, high policy intervention risk. * **Gold:** Cautious short-term; wait for QE signal before going long. * **Trader Equities (e.g., Vitol):** Cautious, as physical flow disruption poses significant challenges.