Weekly KAOS, 7/2/26:
The Dog That Didn’t Bark in Hormuz
Welcome to the Weekly KAOS — UrbanKaoboy’s end-of-week roundup covering Macro and Geopolitics, where I try and tease out the most impactful bits of the week.
Apologies for the skip last week, as I was on my last week of vacation in Poland. This week is coming to you early because of the holiday-shortened week — Happy Early 250th Birthday to the United States of America!
Themes of the Week
Live fire in the Strait can’t wake Oil, the USD Wrecking Ball drives the yen to a four-decade low, and Warsh debuts by declaring inflation risks have come down
The most important thing Oil did this week was that it didn’t do much for a change.
In one of the Sherlock Holmes stories, the clue that cracks the case is the guard dog that didn’t bark in the night — the silence itself is the tell. That was Oil this week. Washington and Tehran traded live strikes over a tanker in the Strait of Hormuz, both sides accused the other of breaking the cease-fire, and then — after a two-percent twitch — Brent shrugged and went back to sleep.
Although still too early to tell, this potentially bodes well for the “Benign Gravity” of Disinflationary Growth I mentioned in Into The Void?: with OPEC+ sitting on rebuilt spare capacity and the war premium repeatedly failing to stick, the Geopolitical risk to Oil seems asymmetric to the downside right now — confounding so many in the market (including me) who had previously worried about the asymmetry being to the upside after over 100 days of Hormuz being shut.
Meanwhile, the USD Wrecking Ball swung straight through the yen — USD/JPY punched past 162, a four-decade low that has the BoJ eyeing the intervention button — and Kevin Warsh walked onto the Sintra stage for his debut and told the world Inflation risks “have come down.” Warsh seems to also think that the “Benign Gravity” of Disinflationary Growth can reassert itself, but the jury is very much out — Oil and the physical AI buildout still get a vote.
