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Hormuz Blockade, Orban Out -2

09:35 14-Apr-26

PPI numbers for March are out with the headline at +0.5%.  That is well below estimates for a full percent or more.  The Core figure came in at +0.2% versus estimates that were at least double that.  February was also revised down.  All of this is positive, but if the market ignored the CPI figures, it will certainly ignore these as well, and as implied yesterday the trend has been toward risk on.  Nonetheless, it would typically seem clear that the Fed is likely to remain on hold while the war with Iran drags on, but that is being undercut by rumors that a hearing on the nomination of Warsh is scheduled for next week.  Though his filing indicate some sort of movement, this service is somewhat skeptical that there will be any actual progress on his confirmation to the Fed Chair until the DoJ drop or downgrade its investigation of Powell.  The real thing to watch for is any change in Beijing hosting Trump, as noted by our parent CrowdWisers service:

China played a strategic role in brokering the current ceasefire going into its hosting of Trump a little over a month from now.  Moreover, it has been able to quantify not only the limits of American military power, but the world's response to economic pressure.  A blockade of Taiwan would generate far more of than the Strait of Hormuz ever could.  This puts Taiwan, and thus Himax in an ever more precarious position, and Korea would be its successor in terms of chip supply, with America trailing and hampered by its ever deteriorating international relations.  That said, it's important to realize that no country could completely dominate chip supply on its own, since the Netherlands hosts ASML and Japan is crucial for substrates and materials.

The American navy is set to blockade the Strait of Hormuz starting at 10AM today after talks with Iran made no progress over the weekend.  American negotiators have left Islamabad and headline oil prices are back in triple digits.  The blockade is likely to be messier than the air strikes conducted over the past six weeks, but it looks feasible.  Broader military action is also being considered.

Less predictable for this service was the loss and concession of Orban, despite clear support from the White House.  Although Congress still seems unlikely to accomplish much before the midterms, this may make Republicans less willing to go along with Trump attempts to consolidate power and suppress free speech.  However, as CrowdWisers wrote last week, markets will "care more about the costs of hostilities and hydrocarbons" detailed in the first paragraph.  Consequently, American equity futures are moderately negative, though they have been improving throughout the morning.

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