Steve Hanke: What Everyone Is Getting Wrong on Iran War, The Commodity Super Cycle & Gold
Summary
Backwardation (spot oil priced above futures) signals critically low inventories; Hanke expects a sharp price spike once physical stocks run dry later this summer.
The Strait of Hormuz is effectively closed (one tanker transited July 16) and Russia has cut diesel exports, squeezing both oil inventories and flows.
Hanke sees the gold bull market intact with a peak near $6,000 per ounce, driven mainly by central bank buying below reserve targets.
Deglobalization forces firms to hold larger precautionary inventories, a structural demand boost that fuels the commodity supercycle alongside war-driven shortages.
Copper and tungsten deficits look structural because most critical minerals are byproducts, so supply cannot respond quickly when demand rises.
Steve Hanke's takeaways
- Top takeaway Anticipates a sharp oil price spike later this summer (toward August 2026): as of the July 17 recording the Strait of Hormuz is effectively closed (only one tanker transited on July 16) with Iran controlling it, Russia has cut off diesel exports, and backwardation signals inventories are near depletion.
- Says the gold bull market is intact and should peak around $6,000/oz (about $6,600 using current-market math) — a level derived from past gold bull-market peaks relative to US real disposable income per capita — with central bank buying the main underlying driver.
- Recommends staying long oil into the spike: the plain-vanilla trade for average investors is buying the majors, which he says are trading at very low prices, while backwardation offers a built-in roll profit and very wide crack spreads favor refiners.
- Argues the war cycle has fueled a commodity supercycle that deglobalization will sustain, as balkanized trade forces larger precautionary inventories; he calls copper a "no-brainer" deficit and expects the tungsten deficit to be sustainable because byproduct supply responds slowly.
- Warns the inflation genie will stay out of the bottle: with about 35% of US individual income tax receipts going to debt service, the Fed faces pressure to monetize the deficit, which he expects to keep pushing bond yields up.
Rick Rule's takeaways
- Top takeaway Quoted second-hand by the host from a recent conversation: Rick Rule's view is that over the next decade the dollar will have to lose about 75% of its purchasing power for the US to service its debt in real terms — a scenario the guest says could carry gold's bull market past his $6,000 peak.
Stijn Schmitz's takeaways
- Top takeaway Notes that tanker traffic into the Strait of Hormuz is even lower than the single outbound transit on July 16, 2026, and argues there will be significant lag effects before effectively locked-out oil fields can restart.
- Uses Rick Rule's estimate that the dollar must lose about 75% of its purchasing power over the next decade to press the guest on why the gold bull market would cap at $6,000 rather than run as long as deficit monetization continues.
- Suggests phosphate producers currently being squeezed by high sulfur input costs could see output prices and margins rise, which the guest endorses.
- Floats smaller oil producers with untapped production as a way to play a price spike, though the guest says that trade requires specialized knowledge.