Stagflation Warning in the USA: Iran Deal Fails

[00:01] this, that the risk of stagflation is now back because peace talks between the now back because peace talks between the US and Iran have now failed. And that's I mean that means serious implications for the economy, for inflation, and also

[00:14] for you. Okay, so let me bring you up to speed about what happened this weekend. US and Iranian officials met in Pakistan attempting to negotiate an agreement to end the ongoing conflict.

[00:27] So, the talks lasted for roughly 21 hours, but in the end, no deal was reached. And according to VP J.D. Vance, the United States made its final and best offer to Iran.

[00:39] So, Vance said that the US made its position very clear what what it's willing to accept and what it would not accept. Okay, so what was the key issue that caused all this to just fall apart, at least from the perspective of the US?

[00:54] So, the key issue was a long-term commitment from Iran that they would not develop nuclear weapons. So, Vance said that the US has not seen that commitment from Iran. And without it, there's not going to be an agreement.

[01:07] So, Vance also emphasized that the US was negotiating good faith and remained in constant communication with President Trump throughout the talks. In fact, Vance said that the US delegation spoke with the president

[01:19] multiple times during the negotiations along with top officials including the and others. But despite all this, no progress was made. Now, on the other side, Iranian state media is telling a very different

[01:33] They're saying that the talks failed because of what they called excessive America. According to Iranian officials, the two several key issues. So, that included well, besides the

[01:48] nuclear development, they're talking about the surrendering of ballistic missiles, cutting proxy funding, you know, going towards Hamas, Hezbollah, and the Houthis, and reopening the Strait of Hormuz.

[02:00] So, both sides are essentially blaming each other. And at this point, there is no agreement and also there's no clear path forward. And now, I want to show you this. Like I literally cannot make this stuff up.

[02:14] thing economically speaking in this conflict is reopening up the Strait of Hormuz, right? And because President Trump cannot get it back open, at least not right now or in the short term, he's decided to

[02:27] one-up Iran. And Trump says that the US will blockade the Strait of Hormuz, not Iran. So, before the conflict, about 140 each day. And during this ceasefire, so the past

[02:41] few days, it's been averaging around six ships per day. Chinese vessels. And that's why President Trump now wants to fully close the Strait of Hormuz, and that's going to start tomorrow on Monday at 10:00

[02:54] a.m. So, so the Strait has now been closed by And I'm sure that the insurance companies, you know, for the vessels, I'm sure they're going to be thrilled about this.

[03:07] most important part about all this because this is going to have direct So, the Strait of Hormuz is one of the most important shipping lanes in the world. And just to remind you, roughly 20% of global oil supply passes through

[03:22] this narrow waterway. And it's more than 40% of global oil And that's not to even mention the other things that we've covered, you know, 25% of global fertilizer exports. So, any escalation in this conflict, and of

[03:37] course, there's going to be disruption, it's going to affect the you know, the supply of available oil, and it's going to spike up the price of oil, which, you know, we're seeing at the gas pump. And I just want to clarify

[03:49] this point because some people may be confused because I mean, I'm sure you heard it that the US is energy independent, right? But you have to understand that yes, the US is a net exporter of oil. However, we

[04:03] still import about 6 million barrels of oil a day. And a portion of what's produced in the US is being exported to other countries that are willing to pay a higher price than, you know, America, which raises

[04:15] oil prices in the US. Okay, right now, there's about three dozen vessels being rerouted to the Gulf of Mexico or the Gulf of Maga, whatever you want to call it. But that's not a solution because

[04:28] you have to remember that 140 vessels pass through the Strait of Hormuz each day. You know, a few dozen, that's not going to solve the problem. And taking that trip from the US to Europe or the US to Japan,

[04:42] I mean, that's a long distance and that's of course very expensive. Okay, but bottom line, why does this matter? Why should you care? It's because higher Why should you care? It's because higher oil prices feed directly into inflation.

[04:54] obviously gasoline prices are going to go up. Transportation costs are going to increase and businesses are going to face higher input costs. because if that happens, then those costs, like those higher costs, will get

[05:09] going to mean higher prices across the entire economy. And just take a look at the price of diesel fuel right now, $5.66 a gallon. I mean, this is close to the record high of $5.81 a gallon back in

[05:24] June of 2022. And I just want to point out that diesel was $3.60 a gallon a year ago. And this comes at a very sensitive time because inflation has already been stubbornly persistent. It's been sticky.

[05:39] because the Federal Reserve has been trying to get inflation down to their target rates. Their goal is 2.0%. But that's been their goal for the past 5 years. And the last CPI inflation report showed

[05:52] that inflation spiked from 2.4% in February to 3.3% in March. you might not think 3.3% is a lot, but it's the acceler- it's the rate of

[06:04] acceleration. It's that's a spike. Like that is very concerning. And I bet that April is going to look even uglier. Which means that the fight against inflation, which was, you know, victory was never achieved,

[06:16] we were making progress, but now that's, you know, stalled and it's reversing. we're looking at here, what we're facing. On one side, we have rising energy prices and upward pressure on inflation, right?

[06:31] slower economic growth even before all this. Like the revised last quarter's this. Like the revised last quarter's GDP down to a growth rate of 0.5%. conditions. Just take a look at the private credit market and the ongoing

[06:46] money printing by the Federal Reserve. And this combination, it has a name. It's called stagflation. Now, to be clear, we are not in stagflation right now. But what this situation does is increase the risk of

[06:59] moving in that direction. And this doesn't affect just the United States of America. In fact, Europe and Asia could be hit even harder. Okay, just so you know, Europe is heavily dependent on imported energy.

[07:14] energy shocks in recent years. So, if oil prices rise again, that's going to put additional pressure on consumers, on businesses, and their overall economic Which means that Europe could see slower growth and higher inflation at the same

[07:30] the same thing. And why should we care as Americans? Well, it's for a variety of reasons, but one important aspect of this is that we need friends. We need allies that will lend money to our governments. Like

[07:45] If we keep hurting our friends and allies, then it's not going to be incentive for them to buy our Treasury bonds and lend us money. Which means a weaker dollar and even higher inflation in the US. And then, when you look at

[08:01] Asia, major economies, for example, Japan, South Korea, India, are some of the largest energy importers in the world. 80% of the oil and 90% of the LNG coming out of the Strait of Hormuz goes to Asia. So, now they're looking for

[08:16] other sources pushing up energy prices higher globally. And higher energy prices directly impact manufacturing costs and economic growth. So, in other words, higher energy prices will slow down global trade. Again, why

[08:31] should we care? It's because it matters for the US because the global economy is connected. If Europe slows down, demand for US exports declines. If Asia slows down, global manufacturing and trade weaken.

[08:46] corporate earnings, to financial markets, and economic growth in the US. So, even though the US is less dependent on foreign oil than it used to be, it's

[08:58] still not insulated from a global slowdown. And I just want you to know even more serious because we're not just talking about a domestic issue here, we're talking about a global chain reaction.

[09:11] Historically, stagflation is often triggered by supply shocks. And one of the most well-known examples was the oil shocks of the 1970s. When energy prices surged, inflation rose sharply, and economic growth slowed

[09:25] at the same time. Okay, but today's situation, it's not identical, but the mechanism is similar. A potential disruption in global energy supply leading to higher prices and slower economic growth. So, I want to

[09:39] tell you this. Here's the bottom line. The failure of these peace talks is not just a geopolitical event. It's much more than that because it's got the potential to impact inflation, interest rates, and the broader economy for an

[09:52] extended period of time. And most importantly, it increases the risk of stagflation. Like that's where we do not want to be. So, the important takeaway of what's developed over this weekend is that

[10:05] overseas. We're talking about a direct impact on Americans. It's about the consequences on prices, on interest rates, and our financial future. Now, here's my concern. If we enter into a stagflationary

[10:18] environment, that's very problematic because the Federal Reserve is trapped. can't raise interest rates, and they should not be printing money. Yeah, you know, that's ideally speaking. However, they're currently printing

[10:32] about $40 a month. But, if this escalates, $40 a month, that's going to look like rookie numbers. So, my concern is that they're going to printing even though they shouldn't be printing

[10:45] money to begin with. Okay, but why would they have to accelerate the rate of money printing? Because wars cost money, billions of money that we don't have. We don't have

[10:57] they just print the money. If this leads us into a recession, then how are they going to respond to get us out of the recession? With economic stimulus, which costs money, which again, we don't have, which

[11:11] is going to have to be printed. So, listen, after the talks have failed, it is my opinion that there's now a higher probability that they're going to in 2026, which is of course inflationary.

[11:25] because the Federal Reserve, they're they're publicly like they're openly the past few months, that they're going to print less money later on in 2026. Like, they're doing 40 billion now, but they said it's going to decrease.

[11:39] don't see how that's possible, especially if the situation escalates, I'd say it's very improbable to go off the word of the Federal Reserve. setting the foundation for my next video, which we're going to talk about

[11:53] de-dollarization, how this whole situation is going to accelerate the Please subscribe. Thank you for the support. I hope you enjoy the rest of support. I hope you enjoy the rest of your weekend. Thank you and take care.