The Middle East conflict continues as it enters day 12.
The IEA is proposing the largest release of oil reserves ever to combat soaring crude prices tied to the war in Iran and to counter the near total closure of the Strait of Hormuz.
While spot oil prices have nearly doubled in a matter of weeks.
In New York morning trade, we are looking at.
As well as higher and this does come after touching nearly 12 a barrel on Sunday evening.
Well this Middle East reset could shift the outlook for everyday Americans waiting for lower borrowing costs and this at a time of private credit and AI disruption concerns bubble below the surface.
Well joining me to weigh in this morning is Chris Whalen, Chairman of Whalen Global Advisors.
Chris, good morning.
Thank you so much for joining us today.
So I know that oil actuarial warfare.
So basically insurance companies refusing to cover ships has stopped oil tankers from moving through the Middle East.
So walk us through the role of insurance agents and of course your take on this conflict and the effect on global oil prices.
Yeah, that actuarial warfare phrase came from an interesting author on substack, and it's correct.
I mean, when the insurance industry pulls their cover of large crude oil carrying vessels, they can't move.
And so right now traffic in the Persian Gulf through the Strait of Hormuz is basically stopped because there is no risk cover for these assets, and people are not going to risk losing a. that's not insured.
So that's essentially what's going on.
There are other factors involved, but the insurance industry is very sensitive to force majeure, including acts of war.
And in the Gulf, you know, you remember many years ago we had similar disruptions in the Gulf, and the British and the US Navy had to escort ships through the Straits, which is not easy.
At some points the straits are less than 2 miles wide.
And I think this is going to keep oil prices elevated for some time to come.
You know, when the, when the conflict first started, you had a big back gradation in oil.
In other words, the spot price was very high, and then the out months fell very quickly.
I think that's going to change.
I think we could see oil prices stay elevated for much of this year.
And speaking of which, the Mideast conflict is creating a massive headache for the Federal Reserve as well as central banks around the globe.
So traders went from betting on a June interest rate cut to now guessing the Fed will leave rates alone to fight off energy inflation until later this year.
But when we're looking at interest rate differentials as well as what central banks across the globe have to contend with, what do you think Americans will have to deal with when it comes to borrowing costs, loans and mortgages.
Well, that's a very good question.
You know, the Trump administration was trying to find ways to push down the cost of housing, and I think, you know, so far that 10-year Treasury, which is really a surrogate for mortgage rates, has stayed pretty stable.
It's traded up to 420, 425, then come back to 410.
If it goes below 410, then rates fall.
If it goes much higher, then obviously interest rates are going to rise.
So.
I think you know for me I don't know that central banks can do anything about inflation that is caused by military conflict.
They typically focus on monetary factors.
If they're going to start chasing inflation caused by the military action in Iran.
I really don't know if their policies are going to be effective, but my guess is we are going to see higher gas prices going into the summer and of course into the midterm elections in the fall, and that's not going to be helpful.
So I think you're going to see the Trump administration try and do everything and anything they can to bring this conflict to an end.
But the Iranians, let's be frank, they have no particular interest in negotiating at this point.
They have everything to gain by keeping the straits closed.
Well, while I have you here, I do want to get your take on what we're seeing in commodities in particular precious metals.
So I understand you have been calling gold and silver the ultimate big picture investment.
So tell us why and what exactly are gold buyers preparing for that stock traders you think are currently ignoring.
Look, gold is to me an asymmetrical trade, Remi, and the reason is that central banks continue to add gold to their reserves.
They are doing this as a hedge against dollars, so you're seeing a slow but very steady rotation out of dollar assets into gold, and it's not like they're Going to stop using dollars, of course not, but they do now value gold as kind of a backstop for their own fiat currencies regardless of what country you're talking about.
Silver's a little different in the sense that the commercial demand drives it.
And there's a dearth of silver right now.
If you look at the Coma, if you look at the London Exchange, all of them are having trouble coming up with deliverable supply, and you've seen actions in India and China which are basically saying that the Asian markets are going to become the price setter.
The miners who've been suffering for years and years at the hands of the exchanges in the West are now starting to become the price setters.
So that's why we're bullish on both silver and gold for slightly different reasons, but it's a core part of our portfolio, and I've been adding to our exposure, frankly in the last couple weeks, even while I was taking stock out in order to raise cash to buy a house, I didn't want to take the market risk of waiting another month.
So you know that kind of gives you a sense of where my head's at right now.
Well Chris, before I let you go, I do want to ask you about the private lending sector.
So another area that we're keeping our close eyes on our private credit.
So do you think, yes, so are you confident that a private lending bust wouldn't spread to everyday megabanks and we are noticing that the S&P 500, the laggard in terms of sector is financials right now.
Yeah, financials have been softening.
I don't think the major nonbanks that are involved in private credit are systemic.
They're very tiny companies.
The big problem here is that, you know, when you put retail investors into private equity and private credit, you're always going to have problems because private investors, retail in particular, have no tolerance for lack of liquidity.
So the whole design of this market was wrong, and I think that you will see in months ahead some significant losses coming out of this sector.
Will it take down banks?
No, I think you've already seen JPMorgan pulling back on lending to private equity firms, private credit firms, and I think the entire industry is going to take a step.
Back from these loans, the regulators are already on this in a very big way, by the way.
So I think, you know, is it systemic?
No.
Is it a problem?
Yes, it could take the equity markets down considerably.
I'm not a big fan of financials this year.
They ran so well last year we're not going to repeat that in 2026 in my view.
Well, Chris, we will have to leave it there for today, but thank you so much for joining us as always and thank you so much for sharing your insights.
My pleasure, Remy.
