In recent weeks, the situation may look like another geopolitical crisis. Iran, Hormuz, oil, Trump, tariffs, the dollar, the Fed and an equity market that still acts as if everything is under control.
But that may be exactly the problem.
When we look at today’s events only through individual headlines, the broader picture can easily disappear. And in our view, that broader picture is becoming increasingly important.
What we are watching today around Iran and oil may not be just an isolated conflict in the Middle East. It may be another part of a much larger game, one that became more visible when Trump reopened the question of tariffs and a hard reset of global trade.
Tariffs were supposed to show U.S. strength. But they also opened a question that more and more parts of the world are starting to ask: how much can the world continue to rely on a system in which America itself changes the rules so quickly?
And this is where the story begins. A story the market, in our view, does not want to fully see yet.
This Is Not Just About Oil. It Is About the Dollar
The United States remains the strongest financial center in the world. The dollar remains the main global currency. U.S. Treasuries remain the core pillar of global reserves. There is no need to question that, because it is still reality.
But even the strongest system needs trust.
And today, the U.S. may need that trust more than ever. Federal debt is around 39 trillion dollars, while publicly held debt exceeds 31 trillion dollars. In 2026, the United States also faces a huge refinancing wave, as a large part of old debt must be replaced with new debt under current market conditions.
This does not mean the U.S. cannot sell its debt. The U.S. market remains extremely deep and liquid. But it does mean one thing: the world must still want to hold dollars and buy U.S. Treasuries.
And this is why tariffs, oil, China, Iran and the dollar are actually connected.
When Trump reopened aggressive tariff policy, the market did not react only with the usual nervousness in equities. There was also pressure on the dollar and U.S. Treasuries. That is an important difference. If only stocks fall, it can be a classic risk-off move. But if the dollar weakens at the same time and Treasuries are being sold, the market is saying something deeper: it is starting to test confidence in the U.S. system itself.
And at that moment, it becomes absolutely critical for the United States that the world still needs dollars.
Why Oil Still Matters So Much
Oil is not just a commodity on a chart. Oil is one of the basic inputs of the global economy. Without oil, transport, shipping, aviation, agriculture, chemicals, industry and large parts of global logistics simply do not move.
And because oil has historically been traded mainly in dollars, it creates natural demand for the U.S. currency. Countries need dollars to buy oil. Oil producers receive dollars. Part of those dollars then flows back into U.S. assets, including government bonds.
This is not a detail. This is one of the pillars of American financial power.
If a larger share of oil trade gradually moves outside the traditional dollar system, this is not just a technical change in payment flows. It is a long-term weakening of one of the links that keeps the global system centered around the dollar.
No serious person is saying the dollar ends tomorrow. That would be a fairytale. The dollar still has depth, liquidity and infrastructure that no other currency can currently match.
But that is not the point.
The point is that part of the world no longer wants to be fully dependent on the dollar in everything.
China, Russia, Iran, parts of the BRICS world and, in recent months, also Venezuela show that there is an effort to build parallel routes. Not as one big revolution. More as gradual circumvention. Through oil, commodities, other currencies, direct trade relationships and flows that are not as easily controlled by the United States.
And that is why it matters where China gets its oil from.
China, Iran and Oil Outside the Main Dollar Channel
China is now the largest energy player on the demand side. It needs enormous amounts of oil, but it also does not want to be vulnerable to a system where all key trade routes and payment channels remain under U.S. influence.
Officially, its main suppliers include countries such as Russia, Saudi Arabia, Iraq, Brazil and Malaysia. But with some trade flows, it is necessary to look below the surface. In 2025, significant volumes of oil flowed into China from Iran, Russia and Venezuela through more complex trading channels. Estimates point to at least 2.6 million barrels per day of such oil, including roughly 1.38 million barrels per day from Iran and several hundred thousand barrels per day from Venezuela.
This is crucial for the current situation.
It is not just that China is buying cheaper oil. It is that China is building room to operate outside full control of the U.S. system. For China, this means cheaper energy. For Iran, it means a way to keep its economy alive. For the United States, it is a problem, because every such flow means less dependence on rules set by Washington.
Venezuela was a previous chapter in this story. Not the main topic of this article. It has the largest proven oil reserves in the world, around 303 billion barrels, roughly one fifth of global proven reserves depending on the methodology. Its current production is weak, but geopolitically it matters because this is about future control over huge reserves and the direction of their exports.
But today, the main point is elsewhere.
Iran.
Iran has oil, gas, strategic geography and influence over Hormuz. And Hormuz is where the trade, energy and financial layers meet in a very direct way.
Hormuz Is Not Just Another Map on Television
When people talk about Hormuz, the debate usually focuses on one simple question: how much oil passes through it and what happens if that flow is disrupted?
But the physical world does not work as cleanly as a chart on a terminal.
In 2025, almost 20 million barrels of oil per day flowed through Hormuz. Alternative routes through pipelines exist, but their capacity is limited and cannot simply replace the full volume.
Yes, over time the market finds substitute routes. Some supplies are redirected. Some are taken from inventories. Someone increases production. Some flows find another path.
But none of that is free. And none of that happens immediately.
A real oil buyer is not only looking at the futures price on a screen. They need to know whether the oil is physically available. When it will arrive. How much ship insurance will cost. How expensive transport will be. Whether the vessel can pass. Whether delivery will be delayed. Whether production will be disrupted because of it.
That is the difference between the paper market and the real economy.
The price on the screen may look manageable for a while. But physical stress in the system can be much larger. And if oil holds around 100 dollars or more, this is not just about more expensive gasoline. It is a cost that gradually spreads through the entire economy. In April, Brent moved around 100 dollars and, on some days, significantly higher depending on the specific spot or futures price.
Expensive Oil Does Not Stop at the Pump
Oil does not move through the economy all at once. That is precisely why markets often underestimate it.
First, it hits transport companies, airlines and shipping. Then industry, chemicals and agriculture. Then companies start dealing with margins. And finally, the consumer sees higher costs return through the prices of goods and services.
This is not complicated economic theory. It is basic cost mechanics.
Expensive oil makes transport more expensive. Expensive transport makes goods more expensive. Expensive energy makes production more expensive. Higher input costs pressure margins. And when companies can no longer absorb that pressure, they start passing it into prices.
On top of that comes another problem, less visible but potentially just as important: fertilizers. The region around the Persian Gulf is important for global trade in urea and other agricultural inputs. If tensions around Hormuz, expensive energy, insurance and transport push fertilizer costs higher, the problem will not stay only in energy. It will move into food.
And food is far more sensitive for both the economy and politics than the price of one technology index.
Through oil, the shock moves into transport. Through energy and fertilizers, into agriculture. Through agriculture, into food prices. Through food prices, into inflation. Through inflation, into the Fed. And through the Fed, back into markets.
This is where the main risk begins.
Not that oil jumps for a few days.
But that higher energy and input costs revive inflationary pressure at a time when the economy itself is no longer that strong.
The Fed Is in an Uncomfortable Position
The U.S. economy today does not look as clearly strong as the equity indices suggest. The consumer is under pressure, rates remain high, debt is expensive and companies will need to prove whether they can really maintain margins in an environment of more expensive inputs.
The market still believes the Fed will eventually help. That if there is a problem, rates will go down and liquidity will rescue sentiment again.
But if expensive oil, tariffs, more expensive transport, fertilizers and food enter the picture, the Fed does not have such a free hand.
If the economy were only slowing, the Fed could ease policy. If inflation were clearly disappearing, it could cut rates. But if the economy weakens while price pressure starts rising again, we get a combination the market does not like to hear.
Stagflation.
Weaker growth, higher costs and a central bank without an easy solution.
In our view, this is one of the main scenarios the market still does not take seriously enough.
The Market Still Believes the Calm Version of the Story
The equity market still acts as if this does not concern it too much. Technology is high, semiconductors remain strong and the AI story once again drowns out most negative headlines.
But the fact that the market is rising does not mean risks have disappeared.
Quite the opposite. If the market holds high in an environment of low volumes, it can mean that relatively little money is moving prices. And in that kind of environment, one trigger is often enough for sentiment to change faster than investors expect.
It can be a worse inflation number. A weaker airline outlook. Margin pressure in transport or industry. Another move in oil. A problem in U.S. Treasuries. A weaker consumer. Or a clearer signal that the Fed will not be able to deliver what the market wants.
We are not saying a sell-off must come tomorrow.
We are saying the market, in our view, has priced in a version of the future that is too comfortable.
A version in which geopolitics calms down, oil falls, inflation stays under control, the Fed cuts rates, companies maintain margins and the consumer still holds up.
That is possible.
But it is not the only scenario. And in our view, it is not even the more likely one.
Oil Will Eventually Fall. The Question Is What It Will Be Saying
One important point needs to be added. Oil will probably fall sooner or later. That is not a surprising scenario, and it does not contradict what we have described above.
But the key question is not only whether oil falls. The key question is why.
If oil falls because the situation around Hormuz calms down, trade flows stabilize, the risk premium disappears and the economy remains healthy, that would be a positive signal for the market.
But there is another possibility. Oil may start falling only once expensive energy, tariffs, higher costs, a weaker consumer and tight financial conditions begin to break demand. And that is not good news. That is not relief. That is the next phase of the crisis.
This cycle repeats in markets very often. First comes the inflationary shock. Energy, transport, inputs, food. The central bank cannot help quickly because inflation is still a problem. Corporate margins deteriorate, the consumer cuts spending and the market refuses to admit it for some time.
Only then does the deflationary phase arrive.
Oil starts falling not because everything is fine, but because the economy is weakening. Industry slows down, the consumer loses strength, companies cut costs, transport declines and demand for energy deteriorates.
For an investor, this distinction is critical.
Expensive oil is a problem for inflation. Falling oil can be a problem for growth. And the market often breaks between these two phases.
That is why it is not enough to watch only the price of oil. It is necessary to watch the reason behind the move. Oil around 100 dollars can signal inflationary pressure. Oil falling back lower can signal relief, but also confirmation that the economy is starting to lose momentum.
And in our view, this is the scenario the market still underestimates. Not only the first phase, meaning inflationary pain. But also the second phase, meaning the deflationary shock that often arrives only when the market thinks the worst is already behind it.
What Makes Sense to Watch Now
In the current situation, headlines are not enough. Headlines will focus on Iran, Trump, missiles, uranium, negotiations and individual moves in oil. All of that matters, but by itself it is not enough.
What matters more is what happens below the surface.
Oil. Spot prices. Physical deliveries. Ship insurance. Transport costs. Fertilizers. The dollar. U.S. Treasuries. Yields. Treasury auctions. Corporate margins. Outlooks from airlines, transport companies, chemical producers, food companies and industrial firms. And above all, the Fed’s reaction.
That is where we will see whether today’s market calm is justified, or whether it is only another phase of denial.
Because in our view, this is not just about Iran. It is not just about one strait. It is not just about next week’s oil price.
It is about a much broader question: whether the world remains firmly anchored in a system where the dollar stands at the center of everything, or whether some trade flows are slowly beginning to move elsewhere.
And if this shift is really underway, it will not look like one dramatic break.
It will look exactly like this.
Like a series of events that appear separate at first glance.
Tariffs. Iran. Oil. China. Hormuz. Treasuries. The Fed.
Only later may we see that these were not separate stories, but one larger change that the market refused to take seriously for too long.
Note: This text is intended for informational purposes only and does not constitute investment advice. Investing in financial markets involves risks, and it is important to conduct your own analysis before making any decision.