Global Outlook: The War For The Strait
Weekly PROPHET NOTES 5/4/26
Welcome to another week! Last one was rather quiet, but on Sunday we got a flurry of new developments in the Iran war as both sides are struggling with the double blockade.
Outside of Iran war, Powell dropped a bombshell and there were some interesting developments in the Middle East (outside of war) and Europe.
Prediction markets continue to provide the best information available online, especially amid all the chaos created by war communication. Take a look at how last week’s events changed forecast on top markets.
Weekly Outlook
US Inc.
It was a rather quiet week in America, with no major scandals.
Congress passed a bill to reopen the DHS after it was shut for 75 days. The bill does not provide new money for immigration agencies, but GOP hopes to fund them in other way by a simple majority.
Comment: the drama is over, but migration remains a hot topic ahead of the midterms.
Spirit Airlines ceased operations after failing to secure a $500 million bailout from the Trump administration.
Comment: Spirit was essentially forced to cease operations as its merger with JetBlue was blocked earlier.
The Americas
Some developments in The Americas between crisis-ridden Cuba and Brazil.
Brazil’s Congress overrode President Luiz Inácio Lula da Silva’s veto of a bill to shorten the prison sentence of Jair Bolsonaro, who was sentenced to 27 years in jail last year for plotting a coup after his defeat in 2022.
Comment: Brazil’s upcoming election is looking to be an interesting one as Bolsonaro’s son is the favorite to win it.
Trump announced that the US Navy would swing by Cuba on its way back from Iran to take over the island.
Comment: Cuba is obviously next in line. Question is when it will happen. And the answer is probably later than expected, considering the current situation in the Middle East.
Asia
No major news from Asia this week, outside of near confirmation that Trump is coming to China:
Middle East & Africa
It’s been another tense week in the Middle East as the Iranian quagmire seems impossible to resolve quickly.
Iran and the US were exchanging deal drafts throughout the week, but failed to reach even preliminary agreement. Iran toyed with pushing the nuclear issue to phase 2, while the US seemed unmoved in its demands.
Both sides were tough when it comes to maintaining the blockade / closure of the Strait of Hormuz. Mojtaba Khamenei threatened to end the US blockade, while Trump vowed to maintain it until a deal on nuclear is reached.
Late on Sunday, Trump announced an escort operation, however it quickly turned out it is just an advisory project for ships willing to cross the strait, with US assistance in defense uncertain.
Iran claimed to hit the US destroyer with 2 missiles, however, the US military denies the attack.
Comment: I’ve included my deeper thoughts in my recent portfolio update, as well as a video on YouTube:
Hezbollah ruled out giving up its weapons under any deal with Israel, rejecting the latter’s core condition for ending the war. Israel also continued to carry out strikes in Lebanon, despite the ceasefire.
Comment: the Hezbollah issue, similarly to Iran, seems unresolvable for now. However, it doesn’t seem to stop US x Iran negotiations anymore. A good sign for peace, if we search for any.
Israeli strikes killed at least 4 Palestinians in Gaza as Hamas official met mediators in Cairo to try and revive a fragile ceasefire, where talks stalled. Israel also intercepted an aid flotilla in international waters near Greece.
Comment: while I don’t see the Gaza conflict flaming up soon, lack of progress in the ceasefire implementation was expected. The situation is stable for now and should remain so, at least as long as Israel remains busy in Lebanon and Iran.
The Trump admin fast-tracked $8.6 billion in arms sales to allies in the Middle East, including the UAE, Israel and Qatar.
Comment: the sale is most likely connected to all the used missiles and destroyed equipment in the current Iran war.
The UAE said it would leave OPEC on May 1st.
Comment: US swap lines have a price.
Saudi Arabia’s public investment fund confirmed that it will stop funding for LIV, the golf tour it co-founded, after spending more than $5 billion on it.
Comment: it seems that the strait closure has some effects on the Gulf economies, contrary to what most like to say.
Europe
Europe is grappling with the Strait of Hormuz crisis and Ukraine war, making for a difficult political and economic environment.
The head of Ukrainian army said Russian forces had nearly reached the outskirts of Kostiantynivka, one of several fortified towns in the eastern Donetsk region.
Comment: Ukraine has a belt of fortified cities, Kostiantynivka being one of them. If they are breached, Russia could advance fast. Ukraine is surely in a dire position, however its hits on Russian oil infrastructure take a toll on the Russian economy, which otherwise would benefit greatly from the Strait of Hormuz closure. Both sides are in a difficult position ahead of summer.
The Pentagon announced that it would remove 5,000 troops from Germany after a disagreement between Merz and Trump. The former said that America was being humiliated by Iran’s leaders. Trump also said he would increase EU tariffs to 25%, from 15%.
Comment: 5,000 troops is a symbolic number than anyhing else, considering that Germany hosts a permanent US base that is being used during the Iran war.
The EU announced it would temporarily relax state-aid rules to allow government subsidies for companies struggling with higher energy costs an inflation caused by Iran war. Changes will remain in place until end of year.
Comment: slowly, but surely, the energy crisis is arriving in Europe, as I’ve been saying for weeks now.
Police declared a stabbing in north London a terrorist incident after 2 Jewish men were seriously injured. Police detained a suspect, while the national threat level was raised to severe.
Comment: it is a direct result of the Iran war, as the UK is instrumental in US military logistics.
Keir Starmer continues to be under fire as MPs tried to start an inquiry into his appointment of Peter Mandelson, however the vote failed.
Comment: a breather for Starmer, however his chances of keeping the top job are weak.
Business, Finance & Economics
Outside of Spirit Airlines bankruptcy, a rather quiet week in business.
American economy grew at an annualized rate of 2% in Q1, slightly below expectations. Jerome Powell in his last meeting warned of higher inflation because of energy shock and dropped a bombshell by announcing he will stay on the board.
Comment: Powell is starting a fight with Trump to cement his legacy as defender of Fed independence. Kevin Warsh is looking at a tough job, grappling with authority issues and building consensus in a divided Fed.
EU regulators charged Meta with breaking the law by preventing children under age 13 from using its platforms. Meta could be liable for up to 6% of global annual turnover.
Comment: EU fight with the Trump admin continues, especially after the recent tariff tantrum.
Wrap up
That’s all for today. This week’s deep dive has been decided - the escort operation on the Strait of Hormuz. This will be a spicy one.
Stay strong and see you soon!
This is not official investment or life advice. Do your own research. This are only my opinions and I encourage anyone to do their own research before putting any money anywhere.
The london attacker also stabbed his muslim friend first. Context!