European natural gas prices surged to levels last seen during the energy crisis triggered by Russia's invasion of Ukraine, when severe supply disruptions sent global markets into turmoil.
The catalyst was an overnight Truth Social post from President Trump declaring "ECONOMIC D-DAY" against Iran. The announcement raises the probability of prolonged disruption in the Strait of Hormuz, a critical maritime transit corridor for Gulf energy exports.
For Europe, continued disruptions in the Strait of Hormuz would constrain access to Gulf LNG, intensify competition for seaborne cargoes, and deepen the continent's reliance on US supplies. With European storage inventories already well below seasonal norms and the winter replenishment window narrowing, traders are slapping a premium on natural gas prices on Thursday.
Dutch front-month futures, Europe's gas benchmark, rose as much as 2.5% today and soared above 65 euros per megawatt-hour, a level last seen in 1Q23.
Trump stated in an overnight Truth Social post that, with Tehran's military and military-industrial base reduced to "now rubble" and its "currency worthless," he will unleash severe economic consequences against "ANY country that allows its financial institutions, businesses, airports, or government entities to provide any type of lifeline to Iran."
Earlier this week, Simon Penn, a London-based UBS macro strategist, focused on Germany's NatGas storage, which is only 50% full, compared with 57% a year ago and well below the 2009-25 average of 77%.
Europe, more broadly, is well below the 2009-25 average of 74%, with storage currently at around 61%.
It's not just low NatGas storage levels that Europeans have to worry about at this time of year, but also a diesel shortage. Combining these two problems, Samantha Dart, co-head of global commodities research at Goldman Sachs, recently warned that this energy crunch is "what keeps her up at night."
Must-Reads:
Morgan Stanley analyst Martijn Rats wrote earlier that "the window to normalize before winter is rapidly closing." Translation: Lower NatGas stockpiles will put a bid under prices and fuel inflation across the EU.
At this point, Europeans had better hope that a strong El Niño would produce relatively mild weather. Otherwise, the continent could face a cold and extremely expensive winter.
Tyler Durden Thu, 08/20/2026 - 11:20Authored by Nick Smallwood via BondVigilantes.com,
Why aren’t we talking more about El Niño?
After an exceptionally hot, dry summer in Western Europe and elsewhere, climate discussions proliferate. But neither mainstream media nor markets seem to be seriously discussing the risks and opportunities presented by what scientists appear to agree will be a “super El Niño”.
In a world where food supplies have already been curtailed by the Russia-Ukraine conflict (especially wheat and sunflower oil), and where next year’s crop yields could be hit by the high price and/or scarcity of fertiliser due to the closure of the Strait of Hormuz – through which 30% of global nitrogen and 50% of sulphur traditionally flow – a particularly strong El Niño seems bound to have a substantial impact on the economies of various South Pacific nations, and food-price inflation globally.
It will also increase the price of logistics. As quoted in the FT on 11th August, raising the cost and decreasing the frequency of transits of the Panama Canal (whose water levels have already dropped dangerously low) will also be inflationary. As food-price inflation has a significant effect on emerging markets, these circumstances should lead to rising rates and currency volatility. We would anticipate plenty of investment opportunities for fixed-income, currency and (agricultural) commodity investors.
The first point to make is that we are facing – yet again – a climate event of historic proportions. The US National Oceanic and Atmospheric Administration (NOAA) forecasts an 81% likelihood of a “very strong El Niño” (see graph), defined as one where the Pacific warms more than 2°C above the seasonal average and the highest classification they use. This event, however, seems set to be particularly dramatic. Australia’s Bureau of Meteorology predicts temperatures rising to 3.5°C above average. Considering that the previous peak in November 2015 came in at +2.6°C, we seem set for a profound climate event that smashes all previous records.
Source: US National Oceanic and Atmospheric Administration (NOAA) July 2026
One of the countries most heavily affected by El Niño is Peru, whose GDP growth can be reduced by over one percentage point by its impact. Extreme weather causes disruption, whether by flooding roads, impacting supply chains or affecting crop yields. Knowing El Niño is coming often deters economic activity and investment as people hunker down for a tough year.
But it is quite amazing how the effect of El Niño on even a relatively small country like Peru can have a global impact in certain areas.
For instance, Peru is the world’s largest exporter of blueberries (over $2.5bn in 2025), so a substantial reduction in blueberry production will affect the availability and price of this fruit globally.
Next, consider the humble anchovy, which is fished for in great numbers off Peru’s shores. In fact, Peru’s anchovy fishery is considered the largest in the world by volume. During El Niño, the warm waters stress the fish and render them infertile, driving them deeper down to find cooler currents. Peru therefore seems likely to miss out on at least one of its two fishing seasons, with obvious implications for the local fishing industry.
What is less well known is that Peruvian anchovies are used to produce 20% of the world’s fishmeal, which is fed to farmed fish, other aquaculture and livestock.
It therefore seems likely that people across the globe will notice the cost of fish rising in supermarkets next year.
Those are just a couple of examples of local effects rippling across the world. But of course the warming of the Pacific Ocean will have a tremendous impact on crop production everywhere. The table below shows the scale of what may well hit us next year. To highlight a few stark examples, Australian wheat yields could collapse by up to 60%, global cocoa and coffee output could fall by 15% and we could see 10% declines in Brazilian corn. The weather will become more extreme, especially in South America, with typhoons, flooding and droughts expected to be more prevalent than usual. This is why we feel that the outlook for food production should have a higher profile than it does because the ramifications could be huge.
Parts of east Africa face serious shortages of staple grains and the prospect of food price inflation more generally is very real – some might say inevitable.
Source: Band of America ML USDA paper July 2026
We therefore feel strongly that, while the eyes of the world have so far been on the oil price and energy costs, a lot more consideration should be given to the effects of global food supply constraints and prices, especially in Emerging Markets.
Food prices are a much larger component of inflation baskets than energy in many emerging economies, particularly in Asia (see chart below).
So while it should surprise nobody that Colombia, Peru and Brazil tend to suffer during periods of El Niño, it may come as more of a shock to realise that the inflationary impact is of similar magnitude on the other side of the world in China, Indonesia, Taiwan, Thailand and Vietnam. Nor does Africa escape its effects, with Egypt and South Africa traditionally the most vulnerable, while in the developed world the UK also takes a hit due to its high proportion of imported food. As we enter the southern hemisphere’s planting season and El Niño begins to take hold, these effects will become more apparent.
All things considered, the risks of a significant inflationary shock in 2027 driven by food prices – and the real possibility of actual shortages in some parts of the world – have a significant effect on emerging markets. The risks are rising, and markets are just not pricing it in.
Source: National statistics, J.P. Morgan, June 2026. Latest data available.
Information is subject to change and is not a guarantee of future results.
However, as always, there is a silver lining, which is that disruption brings opportunities as well as risks.
Investors in agricultural commodities have a fascinating year ahead. Rising inflation should mean a concomitant rise in rates, which will have a significant impact on currencies and local-currency bond markets. There will also be idiosyncratic stories driven by extreme weather. For instance, the last El Niño caused very heavy flooding in southern Brazil in May 2024, destroying crops and local businesses. In turn, this caused fears of a major deterioration in asset quality for the local bank, Banco do Estado do Rio Grande do Sul (BRSRBZ), whose outstanding bond price dropped to 89.
Source: M&G Bloomberg Brazil Banco do Estado do Rio Grande do Sul 5.375% 2031. January 2026
The relatively few investors who followed the name saw how swiftly the government reacted with a support package for the state and bought the bond near its lows.
It was called at par on time early this year. It would be a major surprise if we don’t see further such opportunities emerge this time around.
Tyler Durden Thu, 08/20/2026 - 11:00Bitcoin surpassed $70,000 for the first time in over two months, propelled by US Treasury Secretary Scott Bessent’s 'Operation Twist'-like move pushing US bond yields (and the dollar) lower followed by a high-stakes meeting President Trump held with crypto industry leaders.
“When yields drop and the dollar weakens, risk assets tend to rally, and we’ve already seen Bitcoin move higher on the news,” said Jeff Mei, chief operating officer at BTSE.
This morning, bitcoin has extended those gains, tagging $72,000...
And Ethereum has surged back up to $2300...
Which lifted ETH/BTC to its strongest level since the start of the year...
Bitcoin ETFs saw major inflows this week, especially yesterday, "as further proof of how institutional demand for crypto-assets is steadily growing,” said Vladimir Tikhomirov, co-founder of decentralized-finance firm Algebra.
But, probably the most notable feature of the price action of the last 24 hours (aside from its scale) was the unprecedented liquidation of short crypto positions...
Data from CoinGlass shows ongoing crypto short liquidations at $3.1 billion for Aug. 19-20.
Thursday’s tally was largest single-day wipeout of shorts ever recorded.
As CoinTelegraph reports, CoinGlass shows Bitcoin accounting for just over half of the total short liquidations at $1.65 billion.
The numbers do not represent the largest crypto liquidation event if long positions are included. It is dwarfed by the $20 billion long liquidation cascade that followed Bitcoin’s reversal from the most recent all-time high of $126,200 in October 2025.
In US dollar terms, data from CoinMarketCap puts Thursday’s total liquidations in seventh place historically, calculating the day’s long and short liquidations as $3.25 billion.
Rajiv Sawhney, head of international portfolio management at Wave Digital Assets, said yield-curve control “was the second-biggest market catalyst on our bucket list that could potentially supercharge a durable Bitcoin rally.”
The biggest catalyst would be a government mandate to buy Bitcoin for a national reserve, he said.
Bitfire Research notes that this rally was not driven by a single headline, but by a convergence of multiple catalysts: an overcrowded short structure meeting regulatory tailwinds, falling long-end yields, and cross-sector capital rotation.
The most direct trigger came from overcrowded short positions accumulated over six months of consolidation. Bitcoin's prolonged sideways trading around $60,000 allowed leveraged shorts to pile up. When prices broke through key liquidation clusters, forced buybacks triggered a chain reaction of covering, creating a positive feedback loop that amplified the squeeze.
Importantly, the spot market had already been signaling institutional accumulation before the derivatives squeeze erupted. On-chain data monitored by Bitfire Research reveals that institutional capital — including entities with listed company affiliations and vintage whale labels — had been actively accumulating at the $60,000 level. Confirming this picture, Bitfire Group's OTC desk posted a record-breaking July, with total trading volume surging 257% month-over-month. These two data streams — on-chain and OTC — point to the same conclusion: institutional spot buying had already picked up significantly before the price breakout, laying the groundwork for the rally.
On the policy front, the SEC unveiled a new digital asset regulatory framework with a safe harbor mechanism: up to $5 million in the launch phase and up to $75 million annually thereafter, with issuers able to exit securities classification upon completing compliance milestones. This sharply reduces compliance uncertainty for early-stage crypto projects, attracting incremental capital to reassess crypto risk pricing.
Macro liquidity also improved. After the 30-year US Treasury yield hit a near two-decade high, the Treasury announced plans to at least double its long-term bond buyback program, pushing the 30Y yield from 5.337% to 5.189%. Gold surged 4.33% in tandem. The decline in long-end yields opened room for Fed policy adjustments, providing liquidity support for high-beta risk assets.
On capital rotation, funds that had piled into AI narratives earlier in the year showed signs of returning. With Anthropic's Q2 revenue growth showing a second-order slowdown, the market began reassessing return expectations across asset classes, and crypto's relative appeal regained attention.
Additionally, Bloomberg reports that the return of positive sentiment to the crypto market was supported by Trump's meeting with crypto executives from firms including Coinbase, Payward, and Blockchain.com. The move helped revive optimism around the Clarity Act, a crypto market structure bill that failed to make it to a vote before the Senate’s August recess.
Trump called on Congress to pass a “fair version” of the Clarity Act, telling the crypto and finance executive attendees at the White House that market structure legislation is the next step in his administration’s digital asset agenda.
“Now we need Congress to take the next step by passing the Clarity Act, a fair version of the Clarity Act,” Trump said.
“It’s a very, very powerful structure legislation which will keep us ahead of China, keep us ahead of everyone else. We’ll open the door to the next wave of innovations and innovators.”
The legislation has stalled over a fight regarding ethics provisions. Trump urged the Senate to pass the bill, and the chamber is expected to take it up again when it returns in mid-September.
Tyler Durden Thu, 08/20/2026 - 10:40