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"It's Getting Worse": HSBC Warns Commodities Face Squeeze As Chokepoint Chaos Spreads

Zero Rss
2 weeks 3 days ago
"It's Getting Worse": HSBC Warns Commodities Face Squeeze As Chokepoint Chaos Spreads

The key takeaway heading into the weekend is that maritime chokepoint chaos has spread from the Strait of Hormuz to the Bab el-Mandeb Strait, while fighting across the Black Sea has intensified between Russia and Ukraine. The widening disruptions have prompted several institutional desks this week to warn that a potential squeeze on physical commodity markets could send prices from energy to agricultural goods higher.

"The Middle East conflict has escalated, putting a substantial squeeze back into commodity markets," Paul Bloxham, HSBC's chief economist for Australia, New Zealand and global commodities, wrote in a note on Friday morning.

Bloxham continued, "Traffic through Hormuz has almost stalled again, and the disruption has spread to the Bab el-Mandeb Strait, the key access point for the Red Sea, for Saudi oil going to Asia and Europe-Asia trade through the Suez Canal."

Bloxham warned that with Brent trading above $100 a barrel and strategic petroleum reserves being rapidly depleted worldwide, energy markets face a mounting risk of a "super-squeeze."

His message was blunt: "It's not over yet," adding, "Hormuz, Mandeb, oil at 100 ... it's getting worse. "

Here's more:

The Brent oil price has risen sharply, to over USD100/b recently; European and Asian gas prices are more than 40% m-o-m; refined product prices, like jet fuel and diesel are surging; urea prices are up 13%; and wheat prices are at a three year high – all on supply constraint concerns. With inventory rundown having been a key adjustment factor preventing much bigger prices spikes earlier in the conflict, and stocks now much lower, concerns about 'tank bottom' levels and non-linearities are expected to come back into focus. It's a 'super-squeeze'. And it's not over yet.

Bloxham also highlighted the market mechanics that prevented Brent from spiking even higher a few months back, including US strategic reserve releases and China's reduction of oil imports and SPR.

But he warned that these buffers are finite and can suppress the price shock for only so long:

As we have actively written about over the past few months, a key reason that commodity prices – particularly oil – did not spike higher earlier has been active reduction of inventories, particularly with the US release of strategic reserves and in China, where oil imports have been drawn down (see 'Better, but the Hormuz disruption is not over yet', 25 June 2026; and 'Hormuz is reshaping commodity markets', 25 May 2026).

However, the challenge is that inventory reduction can only provide an offset for so long.

At some point, concerns about stocks falling to critical levels may show up in non-linearities in markets (see Hormuz still closed: Beware Strait non-linearities, 28 April 2026). However, even with a deep-dive looks at measured stocks and supply pathways, it is hard to be definitive about when reserves will reach these critical levels. Commodity markets are highly adaptable, and when the demand is there, flexible markets often find a way to deliver. Aggregate price benchmarks also only go so far. In the face of acute supply shocks, commodity markets tend to fragment, with many different prices for the same products in different locations and for different delivery times (see More fragmentation as Hormuz blockage continues, 13 April 2026).

That said, the longer the disruption is in place – and the recent escalation suggests it is, indeed, going on for longer – the more likely it becomes that commodity prices will spike higher, in non-linear ways, as stocks are depleted.

A growing list of institutional commodity desks, including Goldman Sachs, RBC Capital Markets and JPMorgan, has warned that the expanding maritime chokepoint crisis is entering a more dangerous phase.

Helima Croft, RBC's head of global commodity strategy, cautioned that the "war enters a dangerous phase with the Red Sea and critical infrastructure at risk."

These desks have raised their near-term Brent forecasts as the disruption spreads. Goldman commodities strategist Daan Struyven warned that Brent could exceed $120 a barrel in the fourth quarter if the Hormuz crisis persists.

Related:

With the US national average for regular gasoline now above $4 a gallon, the energy shock has crossed a politically sensitive level (again), which could increase pressure on the Trump administration to pursue a diplomatic off-ramp.

Tyler Durden Fri, 07/24/2026 - 09:20
Tyler Durden

Braggawatts, Cheap Chinese Compute, & Simple ROI

Zero Rss
2 weeks 3 days ago
Braggawatts, Cheap Chinese Compute, & Simple ROI

Authored by Peter Tchir via Academy Securities,

With weakness in chips and AI the prior week, that was a major topic of conversation, as was the escalation in Iran (please see Academy’s Geopolitical Analysis for the latest on Iran and geopolitics more broadly).

Two key themes from last weekend’s From Trinkets to Compute seem to be playing out:

Cheap Chinese Compute

Most importantly, the story of Cheap Chinese Compute is garnering staying power. While DeepSeek may have been a one-off, the story is increasingly about China delivering Cheap Compute. We have seen China flood/control markets in the past. I didn’t see it coming in compute (at least not yet), but it might be here?

  • China doesn’t have to deal with NIMBY, but they do make a lot of chips (generally lower quality, but a lot), and have been ramping up all forms of electricity production and storage for years. The U.S. is finally getting on board with this ProSec™ theme, while the rest of the world is only starting to wake up to the need and potential opportunity that adopting a ProSec™ mindset delivers.

  • On the less “savory” side are “allegations” (and I’m being polite here) that a lot of the Chinese compute trains by “distilling” from existing models (inundating existing models with requests, to somewhat “copy” their answers) rather than training their models from scratch. It is a big cost advantage and time saving mechanism.

Earnings

Less important was my flipping from “earnings will matter” to “earnings might not matter.”

We don’t really spend a lot of time on single stock earnings. It isn’t our “thing” in general. But we do follow the earnings. What we can say so far on this front is that when the earnings and announcements hit the tape, they seem very strong. The instant reaction in the media (and social media) tends to support the strength of the results. Then the stocks seem to drift lower (in some cases worse than drift). 

The earnings bar seems to be set incredibly high, so far.

This is concerning when trying to determine the direction of the next leg.

Braggawatts

I’m not sure how I missed the term Braggawatts, but it caught my attention when my friends at ZeroHedge sent out a tweet that used the term.

The Next Phase Of Shrinkflation: Rolling Blackouts https://t.co/dYmR3d7Kn9

— zerohedge (@zerohedge) July 20, 2026

  • Basically, braggawatts is a term used to express skepticism over how much in the data center and AI space can be physically constructed (i.e., in the real world) versus all the existing announcements and expectations of future announcements.

    • From access to chips, to water, to electricity, to getting all of the various state and local regulatory approvals, the argument is that a lot more compute has been announced than can be completed within the timeframe of the announcements.

    • This is consistent with some anecdotal evidence of cost and time overruns on projects (that is something we were hearing about more frequently than in the past).

If braggawatts are real (we need to explore this more):

  • This should be good for credit spreads in the sector. The logical conclusion would be to announce fewer new projects and prioritize existing projects.

  • Would be bad for the “picks and shovels” in the AI / Data Center industry.

Simple ROI.

To a large degree, return on investment analysis surrounding AI and the AI spend has been minimal in my view.

  • On the one side you have a “build it and they will come” mentality (often the “only” risk has been described as not building enough, fast enough – which hardly encourages traditional scrutiny of costs versus revenue).

  • On the other side, no CEO in their right mind would say anything other than that they were launching AI initiatives within their firm to capture efficiencies. The cost of compute has gone up. Actually, let me rephrase that, companies are being charged a cost of compute more in line with the cost of producing the compute than they were before. While the cost of providing compute seems to be increasing (shortages, etc.) part of what users are seeing is that the price that was subsidized to encourage use and to create moats (to the extent moats can be created and held) is being subsidized less. Increasing, and we’ve been writing about this for months, we are moving from “we have to try AI, or be left behind” to “we’ve been using AI, now let’s analyze the cost benefit of that.” Is that why some of the token utilization charts are showing declines from the peak?

If I’m right and some of these forces connect, it could bring pressure to bear on the space. That is “fine and normal.” What concerns me is how much money has flown into passive vehicles in the space, and how many leveraged products there are in the space. Not just the very large SOXL (which is index based) but also a lot of individual stocks in this have leveraged ETFs. 

I fear that this is a risk that can and will accentuate moves to the downside (just like it does on the upside).

Bottom Line

The escalation in Iran is not good for my view on potential rate cuts. While my outlook on inflation wasn’t entirely dependent on the free flow of oil (including more oil that had previously been sanctioned), it helped a lot.

On the AI front, I’m positive on credit spreads, but remain vigilant on valuations. The recent reaction in markets to what seemed like strong earnings releases only accentuates that concern.

Tyler Durden Fri, 07/24/2026 - 09:00
Tyler Durden

NANO Nuclear And Fortil Advance Critical KRONOS Fuel System

Zero Rss
2 weeks 3 days ago
NANO Nuclear And Fortil Advance Critical KRONOS Fuel System

NANO Nuclear Energy has pushed another critical piece of its KRONOS MMR program toward preliminary design, this time with French engineering group Fortil.

If there's a corner of the French industrial sector that America should be comfortable leaning into, their nuclear segment is arguably the safest bet. Their 57-reactor fleet, accounting for 70% of the country's electricity generation, is only surpassed by the US and Chinese commercial fleets.

The companies said conceptual design work is nearly complete on the reactor’s Fuel Handling & Storage System, which will manage the safe handling, storage and movement of nuclear fuel throughout operations. The work includes defining subsystem interfaces, evaluating engineering solutions and producing documentation needed for the next design stage.

It’s not the most glamorous part of a reactor, but it’s the sort of picks-and-shovels engineering that separates a reactor rendering from an operating nuclear plant.

Fortil’s dedicated nuclear team is handling multidisciplinary work across mechanical and systems engineering, nuclear safety, instrumentation and control, and radiation protection. The consultancy has more than 2,500 employees across 30 offices in 14 countries, giving NANO access to an international engineering bench as KRONOS moves toward potential fleet deployment.

The milestone follows the NRC’s formal acceptance of the KRONOS Construction Permit Application for a full-scale reactor at the University of Illinois Urbana-Champaign. The agency began formal review activities in June, with environmental and safety evaluations expected to progress through 2027. Initial construction could begin in the second half of next year.

NANO’s story has increasingly become about more than a single reactor. The company recently acquired Secured Transportation Services for $13 million, turning itself into a revenue-generating nuclear logistics operator. That business helped execute a record 1.7-metric-ton HALEU shipment from Japan and supported the removal of highly enriched uranium from Venezuela.

The U.S. has secured its largest-ever HALEU fuel shipment, working in partnership with Japan. This significant transfer advances President Trump’s strategy to restore America's energy dominance and power next-generation nuclear reactors. https://t.co/h5Oc6f5kRq pic.twitter.com/EG7kA9Eopg

— NNSA (@NNSANews) May 7, 2026

The company is in the midst of an aggressive and wide-ranging expansion plan with business segments across the nuclear value chain. In just the past year, they’ve advanced a proprietary HALEU transportation package, won a U.S. Air Force innovation contract, and signed an agreement with Supermicro targeting nuclear-powered AI data centers. Additional partnerships are targeting South Korea, the Gulf region and a potential 1-gigawatt Texas data center campus.

Tyler Durden Fri, 07/24/2026 - 08:25
Tyler Durden

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