Global Outlook: Schrodinger's Strait
Weekly PROPHET NOTES 6/29/26
Welcome to another week! Last one was extremely volatile. Between the Strait of Hormuz, Lebanon and all the other global events, we got little breathing room.
It has also been a wild week on prediction markets. Not only geopolitical, but also tech markets experienced massive volatility. All in all, we are in a very intense period ahead of the more relaxed schedule come July.
Let’s take a look at the markets and make sense of the world!
Weekly Outlook
US Inc.
Senate voted 50-48 to pas a war powers resolution that seeks to limit Trump from taking further military action against Iran without Congressional approval.
Comment: the resolution is mostly meaningless as Trump can simply veto it. While it is a strong statement, it doesn’t really change the reality on the ground. Especially since the US is not actually looking to fight again based on traders’ assessment of the situation.
A federal judge barred Trump from requiring proof of citizenship to register to vote. The president is separately pressuring the Senate to pass a bill containing that requirement.
Comment: traders doubt that Trump will manage to push the act through Congress. Ultimately, it seems that the cause is dead ahead of the midterms.
Inflation rate reached its highest level in more than three years, rising to 4.2% in May, up from 3.8% in April. The increase was largely driven by the Iran war’s impact on energy prices.
Comment: traders now see 45% chance of a rate hike by October meeting. Not really changed since the inflation print as earlier we got the PCE print which is the preferred inflation measure of the Fed. PCE was also the highest in years.
The Trump admin asked OpenAI to restrict the release of its latest model, GTP 5.6, to government-approved partners before fully rolling it out. This is the second model, after Claude Mythos, to have been restricted by America.
Comment: I’m not sure wether the current US approach to AI is the correct one. Other countries can already use both US and Chinese models that prove to be very effective.
On the same note, the Trump admin allowed Anthropic to release Mythos 5 to about 100 trusted partners, including companies and government agencies.
Comment: moving forward, we can expect all US frontier models to be heavily restricted for the common folk…
SCOTUS issued several rulings in line with the Trump admin’s views. It determined that migrants could not claim asylum if they did not physically enter the country, enabling them to be turned back at the border. It also scrapped protections of Haitians’ and Syrians’ rights to work and live in the country. And it struck down a law restricting the right to carry guns in Hawaii.
Comment: small wins matter.
The Americas
Keiko Fujimori has all but officially won Peru presidential election. Roberto Sanchez, her rival, alleged that the election is fraudulent, but he lacked any proof.
Comment: Polymarket has had her at 99c since the election night.
Two big earthquakes struck Venezuela. The most recent count put the death at over 1,500 and injuries at 3,300. The rescue operations are still ongoing. The UN Development Program estimates that the economic impact of the disaster may amount to roughly 6% of GDP. The two earthquakes are the country’s largest and possibly the deadliest in over a century.
Comment: my thoughts and prayers are with the people of Venezuela.
Manuel Adorni, the chief of staff to Javier Milei, resigned. He is under investigation for graft, including lavish trips and the purchase of a flat at a suspiciously low price. The scandal, which broke out in March, has impacted Milei’s popularity.
Comment: usual day in politics. The crisis will pass.
Asia
Kim Keon Hee, a former first lady of South Korea, was sentenced to seven years in jail for receiving bribes.She is married to the former president, Yoon Suk Yeol, who was ousted and subsequently jailed after declaring martial law in 2024.
Comment: they went after Yoon hard. The fact that they punished his family shows that South Koreans took the insurrection extremely seriously.
Australia will double the maximum penalty for companies failing to enforce its under-16 social media ban to around A$99 million ($68 million). It claims that platforms are not complying with the rules.
Comment: the more resistance to these laws, the better. Access to information shouldn’t be regulated.
Middle East & Africa
This week revolved around the Strait of Hormuz. Initially, we saw a big surge in traffic. However, by the middle of the week, Mohammad Bagher Ghalibaf, Iran’s lead negotiator, said Iran will administer the Strait of Hormuz. Iran has also agreed to set up a telephone hotline for ships passing through the waterway.
This happened as the IMO corridor saw mored than 60 vessels using it in 24 hours.
America also lifted sanctions on Iranian oil and petrochemical exports for 60 days, in line with the MoU.
On Thursday, however, shipping was halted after a Singapore-flagged cargo ship came under attack. The attack came after IRGC threatened all the ships that are crossing the strait without coordinating it with Iran.
The attack was followed by an American response, which was later followed by strike son several American military bases in the region. Both countries continued to trade blows into the weekend despite the ceasefire agreement.
Finally, just before the markets open, America and Iran have reportedly agreed to stand down and continue the negotiations.
On the other side of the Middle East, America, Israel and Lebanon signed a framework agreement. In it, the three countries agree to cooperate in an effort to restore Lebanon’s government monopoly on arms and full territorial sovereignty.
Comment: the Iranian escalation had most likely resulted from their need to manage the flow through the Strait of Hormuz. However, the subsequent strikes in my opinion resulted from the Lebanon framework. It is essentially a declaration of war on Hezbollah, that technically does not violate the Iran MoU. I write and say more about the Iran war in my recent video and article:
Red Light, Green Light
To understand an action, you need to understand the purpose. A week and a half ago we learned of an MoU between the US and Iran. It was my outlier scenario.
Europe
Ukraine attacked Crimea with drones, hitting a large power plant and leaving Sevastopol without power. Crimea has been under constant attack for months as it is strategically important for the Russian military supply chains.
Vladimir Putin acknowledged that Russia was facing fuel shortages after Ukrainian strikes on Russian refineries. He said though that the problem was not critical and that his forces would continue to attack Ukraine.
Comment: as both countries escalate, chances for a sustained ceasefire remain extremely low. At 26% chance by the end of the year, the forecast reflects the reality on the ground: after four years of a war of attrition, both sides are tired, but unwilling to compromise. Quite the contrary: they are escalating.
France said it is evaluating its response after Burkina Faso severed diplomatic ties. Burkina Faso, a former French colony, accuses France of supporting terrorists and subversive networks in the West African country.
Comment: as I’ve been saying for over a year now: Africa is extremely important as it is resource-rich. We will have wars there. These are some of the signs.
Andy Burnham was sworn in as a member of Parliament. He is now all but confirmed to replace Keir Starmer. Now the main questions revolve around his cabinet picks.
Comment: his top picks are a small divergence from the Starmer cabinet. Only the Chancellor of the Exchequer is expected to be replaced with Ed Miliband, a staunch left-winger, as a favorite to take the job. One must wander though, what was Wes Streeting promised in return for abandoning Starmer…
Aleksandar Vucic, Serbia’s president, said he would resign in the next few weeks and trigger early elections. His term had been due to expire in 2027. His announcement was unexpected.
Comment: the protest in the country were slowly losing steam. I’m not sure what prompted him to resign now, but we will see what will come out of it in the next few weeks.
Whole Europe saw record-breaking temperatures this week, prompting big AC debates on X (sic!).
Temperatures approached, and in some cases exceeded, 40 degrees Celsius (104 Fahrenheit).
Comment: the sudden heatwave caused a fast drought in Europe. You can see the change in color in France in less than a month. Crops season will be devastating, but maybe we will get a strong, good wine as a consolation prize…
Finland’s unemployment rate reached 12.7% in May, the highest since 2000. The country now has the highest joblessness rate in the EU, surpassing Spain. Its economy relies heavily on exports, particularly that of metals and petrochemicals and has suffered from weak demand and disruptions relating to war in Ukraine and Iran.
Comment: young Finns, compared to young Spaniards, have a higher chance to enroll in the army as Finland is bordering with Russia, which has recently threatened to deploy more forces to the border after Finland eased the regulations on import and transit of nuclear weapons.
Volkswagen aims to cut up to 100,000 jobs, double what was previously suggested.
Comment: the German giant simply can’t keep up with the Chinese under the current economic and tariff regime. That’s what years of neglect cause…
Others
Apple raised prices for iPads and MacBooks by around 20% worldwide blaming an unprecedented increase in the cost of memory and storage chips. AI labs are buying out all the capacity. iPhone prices are left unchanged (for now).
Comment: at least chances are we will see some innovation from Apple this year.
Cape Verde, an island nation of around 500,000 people, advanced past the group stage in the World Cup, shocking the markets a bit.
In another World Cup news, Lionel Messi became the World Cup’s highest-ever goal scorer. He now has 18 goals and counting. However, Kylian Mbappe is just two goals behind him.
Comment: are you enjoying the World Cup? Post in the comments who you are rooting for!
Wrap up
That’s all for today! I’ve pushed the last week’s deep dive to the Portfolio Update. However, I do have a longer piece that I’m writing and hopefully I’ll manage to publish it this week.
Stay strong and see you soon!
This is not official investment or life advice. Do your own research. These are only my opinions and I encourage anyone to do their own research before putting any money anywhere.