20% Of Global Oil Cut Off; Is Economic Collapse Next? | Louis Gave

Korean stocks plunge 12% on geopolitical panic

The KOSPI crashed 12% overnight and 15% for the week, though this partly reflects profit-taking after a 120% annual gain driven by a Christmas Eve tax incentive that encouraged repatriating capital from US tech stocks.

Strait of Hormuz closure threatens Asia disproportionately

Approximately 90% of Persian Gulf oil flows to Asia, with 20% of global crude transiting the now-closed strait, creating an immediate crisis for import-dependent economies while the US remains roughly energy self-sufficient.

China less vulnerable than US allies

Unlike Korea, Japan, India, and Thailand, China has built strategic stockpiles, diversified supply via Russian pipelines, and pushed EV adoption to 50% of new car sales, providing buffer options its neighbors lack.

Oil prices remain surprisingly subdued at $73

Despite the Hormuz closure, WTI trades at only $73 because the futures curve suggests markets expect a short-lived crisis, though Gave believes $90-100 is more realistic given the supply shock.

Russia emerges as primary beneficiary

Higher oil prices boost Russian revenues while Western pressure to curtail Russian exports becomes politically impossible when simultaneously confronting Middle East supply disruptions.

Europe likely to resume Russian gas purchases

With Qatar unable to export LNG through the crisis, European natural gas prices have surged 80-90%, making it economically and politically necessary to ease sanctions and buy more Russian energy.

$90 oil would trigger global recession

Energy-intensive emerging markets would stall immediately, while Western consumers face severe disposable income squeezes from higher utility and gasoline bills, potentially killing asset prices and worker incomes simultaneously.

Fed likely to cut rates despite inflation

Gave argues the Fed prioritizes financial stability and employment over inflation, citing 2022 when they maintained QE despite 6.5% inflation, and will likely cut rates to support struggling equity markets even if oil spikes.

Political backlash threatens incumbents

Persistent inflation acts as a "killer of political careers," creating risks for the Trump administration and Republicans in midterms if higher energy costs squeeze voters despite military victories in Venezuela and Iran.