Crude crashes, dollar bucks: Wildest week in years
Fears of escalation of the Mideast conflict, a vote by Iran’s parliament to close the Strait of Hormuz, even talk of nuclear war, set off a massive buying frenzy for U.S. dollars and crude oil to start the week. By mid-morning Monday, however, both explosions fizzled, the value of the greenback tumbled and crude left a “blow-off top” sinking by nearly $ 15 per barrel. Talk of truce fueled the downward spiral, while increasing U.S. crude production pushed oil lower just as political pressure for interest rates cuts pushed the greenback downward. Gold and grains ignored the wild swings and fell moderately as the movie continued.
Strait facts about Hormuz
Conflict and then ceasefire involving the U.S., Israel and Iran has brought the Strait of Hormuz into the news. The strait, shared by Iran and Oman, connects the Persian Gulf to the open Indian Ocean via the Gulf of Oman and the Arabian Sea. Roughly 25% of the world’s oil, 17 to 18 million barrels daily, and 20% of the world’s natural gas pass through the strait. The tight waterway is just more than 100 miles long and 24 miles wide at its narrowest point.
At the height of tensions in the current conflict, many feared that Iran might block the strait, using its Navy or deploying difficult to remove mines in the water. While most of the oil coming out of the Persian Gulf heads to China and various Asian ports, the cut off oil could raise world prices to $100 per barrel.
Even as tensions have eased, the Strait of Hormuz remains a vital point for oil and natural gas stability in an area where political instability reigns.
China meddling with rare earth metals
Modern technology has created an increased demand for rare earth elements. Scandium, yttrium and the 17 lanthanides, although sounding like a modern rock band, is the list of highly sought after metals.
The value of the elements lies in their many modern uses in smartphones, LED lights, hybrid cars, wind turbines, nuclear power, medicine and manufacturing. National defense uses them in guided missiles, radar, and secure communications. While the metals are abundant in the world, they are never found in high concentration, often mixed with other metals, difficult to separate out and highly polluting. Processing involves toxic waste, radioactive water, toxic fluorine and acid release.
China produces more than 70% of all rare earths and processes more than 85%. Recent tariffs and geopolitical battles with China have led the U.S. to look at other possible sources; however, this week’s talks between the two nations might lead to some progress in obtaining the rare earths. A deal has already been made to import the metals from Ukraine. Other potential sources are Greenland, Canada and U.S. unexplored areas.
We’re number one, but they’re third
Despite some recent troubles, the German economy remains the third largest in the world, behind the U.S. and China. With a .4% growth in the first quarter of 2025 and exports up by 3.2% from the previous quarter, Germany expects to be back on good footing by 2026 with current inflation trending down, wages moving up and government spending on the economy improving.
In 2023/2024, though, the German economy met the definition for recession with more company closings than in the 2011 financial and economic crisis. The economy took hits from the Russian gas line closure during the Ukraine war, their own phasing out of nuclear energy and recent tariff issues diminishing trade with the U.S., leading to 60,000 job cuts.
Despite Angela Merkel’s long reign, she did not loosen the tight government spending rules that prevented government debt and limited borrowing. In 2021, new leader, Olaf Scholtz, continued to limit debt as he faced the Ukraine war, continuing energy issues and inflation.
A 2025 shift to government by the center-right CDU/CSA party coalition led to Friedrich Merz’s rise to leadership and a move to freer fiscal policy to improve infrastructure, energy costs, environmental issues and innovation. Despite continuing trade issues with the U.S. and China, German top imports remain cars and components, nuclear reactors, electric machinery and pharmaceuticals. Interestingly, the country also imports cars and parts, electronics and machinery and crude oil.
CME midday prices — Price per bushel: July Soybeans, $10.32; July Corn, $4.17; July Wheat, $5.26. Livestock per 100 pounds: June Cattle, $225.00; July Hogs, $113.07. Metals per troy ounce: August Gold, $3,286; July Silver, $36.03. July Copper per pound: $5.07. August Crude oil per barrel: $65.37. The September S&P futures contract is trading at 6228.50.
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