The Strait of Everything
The Strait of Everything
March 13, 2026
Twenty miles wide. That's the Strait of Hormuz. Twenty miles separating the Persian Gulf from the open ocean, and apparently, stability from chaos. For two weeks now, that narrow strip of water has been the hinge on which the entire global economy swings — and it is not swinging kindly.
Let's take stock of where we actually are.
Brent crude is back above $100 a barrel. WTI hit $95.73 Thursday, after touching $120 earlier in the week, then crashing toward $80 when Trump hinted the conflict would be "short-term" — before climbing again after the new Iranian leadership said the Strait would remain closed indefinitely as a "tool of pressure." The Dow shed 739 points on Thursday. The S&P 500 slid 1.52% and the Nasdaq dropped 1.78% in a single session. Markets opened Friday with no resolution in sight.
Goldman called it the largest oil supply shock on record, predicting prices could exceed $145 per barrel if Strait flows remain at current levels through the end of March. The IEA agreed to release 400 million barrels from emergency reserves — the biggest coordinated dump in history — and it bought maybe 48 hours of relief before crude found its floor and started climbing again. You can empty your reserves. You cannot empty the war.
Meanwhile, the CPI print for February that dropped Wednesday was almost comically irrelevant. Consumer prices rose 2.4% year-over-year, core up 2.5% — both figures above the Fed's 2% target, both figures already a historical artifact. That data reflected a world that existed before February 28th. Fuel prices are now on track to surge 20% this month alone. One economist estimates monthly inflation could jump as high as 0.9% — the highest in four years. The February CPI is about as useful right now as a weather forecast from three weeks ago.
The Federal Reserve sits in a position no central bank wants to occupy: growth slowing, inflation accelerating, and every tool they have makes at least one problem worse. The U.S. economy lost jobs in February and the unemployment rate edged up to 4.4%. The labor market weakening. Energy costs exploding. Pick your poison. Cut and you fan the inflation; hold and you watch a cooling economy turn cold. Chicago Fed president Austan Goolsbee put it plainly: "As we get more uncertainties, I kind of think that the time at which it makes sense to act keeps getting pushed back."
This is monetary policy paralysis dressed up in the language of patience.
Futures markets are now pricing in only one 25-basis-point cut this year, likely around October. Morgan Stanley sees two cuts total — but warns both could be pushed back to September or December depending on the energy picture. Six months ago the same consensus had four cuts priced in for 2026. The rate path has been repriced in real time, live, in front of everyone, and we are nowhere near the end of the repricing.
Then there's the Kevin Warsh subplot, which is either fascinating or alarming depending on your priors. Trump's Fed chair nominee has staked out the view that oil price shocks don't really drive core inflation — and that rates should already be lower than their current 3.5%-3.75% band. He may be right on the academic point. But there is something genuinely disorienting about the prospect of cutting rates into a $100 oil environment because your theory of inflation excludes energy. Markets will have something to say about that experiment.
On the crypto side, the behavior has been instructive. Bitcoin crossed $73,669 on March 5th — its highest in almost a month — then fell back below $70,000 as the Strait story refused to resolve. Thursday's risk-off wave dragged it lower again; at $69,600 Friday morning. Despite the recent drop, BTC is still up roughly 7.8% over the seven-day window. CryptoQuant noted both short- and long-term holders have started selling at losses — not panic, but not conviction either.
The more interesting story sits on Hyperliquid. The decentralized exchange's oil perpetual contract — CT-USDC — saw $1.32 billion in volume over 24 hours, up from roughly $21 million on a normal day before the conflict began. Traders who can't or won't touch equity futures are getting their commodity exposure through a crypto derivatives platform. That's not a curiosity. That's a structural shift happening in real time, and most of the financial press is too busy writing about Brent to notice.
The ECB is caught in a different bind. ECB governing council member Madis Muller admitted the probability of a rate hike has increased. A rate hike. In the eurozone. In 2026. Europe imports nearly all its oil and a significant portion of its LNG from the Gulf. The Dutch TTF natural gas benchmark hit three-year highs this week before pulling back slightly. The region entered this shock with already-fragile growth, stalled German fiscal stimulus, and a trade war hangover from 2025. The margin for error is paper-thin.
ING's developed markets economist James Smith observed that the initial energy reaction looks "eerily familiar" to the early days of the Ukraine invasion — but argued the global economy today looks very different from the 2022 shock, when supply chains were fractured, job markets tight, and fiscal policy was pouring gasoline. Maybe. But 2022 also started with people saying it was different this time.
There's a deeper question underneath all of this that nobody is quite willing to ask in plain terms.
The modern global economy was built on the assumption that the Strait of Hormuz is open. Not probably open. Always open. Supply chains, inflation models, central bank frameworks, energy infrastructure — all of it was engineered around the throughput of that corridor. Twenty percent of global oil supply, every day, running on the quiet assumption that it would keep running.
It isn't running now.
Japan gets roughly 95% of its oil from the Middle East, about 70% of it through the Strait. The Nikkei 225 fell 5.2% last week to hit two-month lows. Not surprising. What is surprising is how long markets managed to price this as a temporary disruption rather than a structural one.
Goldman, Morgan Stanley, the IEA, and two weeks of oil data are all saying the same thing: this isn't a spike you fade. This is a regime shift you adapt to. The question is whether portfolios, central banks, and governments move fast enough to adapt — or whether they spend the next three months insisting that oil shocks are "transitory."
We've heard that word before. It didn't age well then either.
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