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Foreign. Hello everyone and welcome to Macro Mondays here at Real Vision. I'm Andres Dio and I'm all by myself this week as my co host Mikkel is on vacation in Italy and the WI fi is not super strong in Tuscany where he is right now. So we'll try and make it without him this week. Even though it's a big geopolitical week with the deal between the US and Iran, remember that this is our sneak peek into our macro research at Real Vision. This is our weekly free show out every Monday, but we also publish both a macro editorial every Monday, a geopolitical editorial every Wednesday, and a portfolio editorial every Friday. And I doubled down on my risk positive tilt in the portfolio last week. But if you want to check the exact single names in the portfolio, you need a pro subscription at Real Vision. It's been a great year for the stock portfolio and well, the stocks are flying again today with this deal between the US and Iran. It was a very, very eventful weekend, to say the least, given this deal that at some point during Sunday looked like it was ready to be signed already yesterday. We now know that the signing ceremony is planned for later this week in Switzer, but let's see whether there will be any hiccups between now and then on Sunday. We obviously had an Israeli attempt to sort of derail this signing ceremony that was otherwise probably going ahead yesterday with an attack at Lebanon. And we obviously don't know whether we will see hiccups before this signing ceremony. We've obviously heard that the deal is done before, but the big change this time around is that all parties agree. So I consider it more or less a done deal. But what's actually in the deal? Maybe we should start with a discussion on that. What we do know in terms of this memorandum of understanding between the parties is that it covers the next 60 days. So the intention is to reopen the Strait of Hormuz to allow the shipping transit to resume, and on top of that also allow Iran to sell its oil globally without sanctions, at least for the next 60 days. What happens after those 60 days is dependent on how the negotiations they unfold from here. Let me put it like that. We do not have a clear understanding between the parties on the uranium question yet. We do have a phrase, as far as I'm concerned, surrounding nuclear weapons, but the enriched uranium is still up in the air and whether the US will be able to get it out is one of the questions that we still do not know the full details around. We've seen A few of the hawks within the US Administration citing some concerns around this. Lindsay Graham is one example of it. He explicitly refers to JD Vance and his negotiation team and he wants them to ask Congress when they settle on the deal surrounding the enriched uranium. So therefore, I mean, we do have some clarity for the next 60 days, but we do not have clarity years ahead. If you ever get that in the Middle east, that is. But in my opinion, this is another example of what I've earlier labeled sequential progress in this question. I actually think that from a market standpoint, we've basically been past the peak of this crisis since the first week of April. I explicitly stated that the crisis was over from an investment perspective in the first week of April, which proved to be incredibly correct. The question is now whether we could see any hiccups in oil space now that we're at least on a path towards reopening the Strait of Hormuz again. So let's look details of the current oil market and whether we're actually in a surplus from a demand, sorry, supply to demand perspective, which in my opinion is the case now. And I've actually held that view for a while. If you look at the chart on page four here, on the sort of decomposition of the oil flows out of the region since the crisis started, out of the 20 million barrels that typically left the region on a daily basis, roughly say 11 and a half of those were replaced by alternative measures. Another couple of million barrels, as you can see from the right hand bar, were replaced by extraordinary exports from the us, both from the spr, but also from other commercial reserves. And then, maybe most importantly, in light green, China has been on a bias strike basically since the latter parts of March, importing, say between France five and a half million barrels less a day, which is a lot. So China and the US in cooperation, have managed to roughly balance the market. And on top of that, which is basically the news since last week, the US administration is now bragging that they've managed to sneak out roughly 3 million barrels a day from the Persian Gulf via this Operation Freedom that was launched, I think it was, in the first week of May. Peter Hexsett said that more than 125 million barrels had left the Strait of Hormuz since the launch of Operation Freedom. And if you calculate the daily flow, that's roughly 3 million barrels, a little bit more than 3 million barrels. And those are were roughly unaccounted for by most of the energy pundits. I laid out the thesis during the other parts of April and the early parts of May that both sides, both the Iranians and the American administration, had an incentive to hide this, since the Iranians managed to sneak out oil along the coastline to India and Pakistan because the US blockade couldn't really interfere in territorial waters and therefore they could sneak out some oil along that coastline, while the Americans also sneaked out oil via escorts from some of the warships. And the Iranians obviously couldn't admit to that because that would showcase that they didn't really have the leverage over the strength that they claimed to have. And the Americans obviously couldn't admit to the oil being sneaked out by the Iranians because that would also be the be the same as admitting to the blockade not really being efficient. So I actually think that by now we, we roughly know that that thesis was correct, that we did see more flows coming out of the region than what was reported. And therefore by the end of the day we've probably been in a mild surplus if we include this import drawdown in China since early April. And that's basically why we've seen falling oil prices, even though every single energy pundit has told you the. I've told you the exact opposite. We've been on the right side of this due to this very cynical thesis that I laid out. What if we look ahead, I mean, obviously over the next 60 days we don't really have any sanctions on Iranian oil. That's not a given going forward. But for the next 60 days we don't have that. If we assume that the Iranian regime will be allowed to export oil without any sanctions globally, is that a potential addition to the global supply? Let's have a look at page five here where we look at the Iranian production and the overall capacity of the Iranian oil sector. And we're talking about a meaningful addition in the case that Iran is allowed to export globally without any sanctions. Obviously now we have a drawdown in the actual production since some of it has been shut in due to the US blockade. But we're talking close to 4 million barrels a day at max. And we know that the Iranian oil production roughly had those levels a day back in say 2005-2008, ahead of the great financial crisis. So we should be able to get back to roughly such levels, which is on top of where we were ahead of the war, an addition of say, 0.75 million barrels a day or something like that. So there is a potential add on source to global supply here if sanctions are lifted on Iran. Again, let me stress, we only know that Sanctions are lifted for the next 60 days, but it comes on top of the tectonic shifts that we've seen in the oil market essentially since the outset of this war. Amidst this war, remember that the United Arab Emirates left the OPEC group, meaning that even the Arabs cannot agree on the direction of travel on the supply management strategy within the OPEC now. And OPEC is basically a Saudi Arabia plus group now, meaning that Saudi Arabia is on its own in terms of trying to impact the supply and price dynamics of the global oil market. I'm of the view that we may get a race to the bottom now in the oil price since many of these producers will have an incentive to increase supply as much as they can in a scenario where the oil price is on a slippery slope. And it remains to be seen whether China will increase its buying its imports of oil again in the case of reopening of the Strait. But typically China takes a very trading oriented approach to that. So they typically fill up their storages when they see a bottom forming in the oil market. And I don't think we're there yet. So I think they'll be patient and they'll probably try and wait and see to see whether they can buy new storages at lower prices. And yeah, if you look at the current surplus, which is probably say between 1 and a half and 2 billion barrels a day, again included this buyer strike from China, we're talking about a meaningful supply surplus that should bring oil prices below $70 a barrel by the end of this month, more or less. So I think it's very, very benign development from an inflation perspective.
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And in light of that, let me throw some garbage at the European Central bank because they hiked interest rates last week, citing concerns around second order effects on inflation and so on and so forth. But I'd also like to point your attention to a detail from their projections going forward, both on growth and on inflation. So they hiked interest rates more or less 24 hours before we found a resolution in the straight of Hormuz, which is a hilarious timing in itself. But they also see a very strong growth picture and a very high inflation picture for the rest of the year. In the Eurozone they see a growth that totals 0.8 over the year for the entirety of 2026, even though we had a negative first quarter growth in the Eurozone. So if you look at page six, I've basically just on the back of a napkin calculated the needed quarterly growth page pays for the European Central bank to to match its projections on growth. And as you can see from the chart here, we basically need 3/4 of roughly 0.5% growth to get to the assumptions made by the European Central bank just last week on growth. I'll take the under on those assumptions any day and I'll also take the under on those inflation assumptions that kind of follow this growth dynamic that they pencil in. So as per usual, I think European Central bank has had a very bad timing in its policy decision here. And it will be very interesting to see how Kevin Walsh addresses this now in the Fed, obviously, because I think he's got a pretty decent window of opportunity to try and sound dovish here. I've said that all month. And I mean, now that we have a resolution, now we have prices from the Strait of the Moose in free fall. We already had that before the resolution this weekend, but it's even more so the case now. I think central banks will have to abandon their inflation alarmism. The European Central bank with a very odd timing last week. I hope that the Federal Reserve does not repeat that. Interesting. Even though we seem to have found a resolution for the Strait of Hormuz, I'm not jinxing it, but it was kind of the second most important news of the weekend, which is almost as bizarre as it gets because we obviously got those export curbs implemented on Anthropic's Fable model. Was it late Friday, European hours, and I don't think I've ever seen anything like it on a software product. The US Administration basically told Anthropic to curb access to the Fable model for everyone outside of the US and as far as I'm concerned, this is basically the Mythos model with guardrails. And some of those guardrails were exposed by a developer team at Amazon and probably Jeff Bezos told the Trump administration, hey guys, the guardrails stay. They're not really guardrails. And therefore the Trump administration told Anthropic to either curb exports or fix those things. And since they weren't immediately fixable, apparently, or Anthropic didn't want to fix them, the model is now offline. A couple of things here. First of all, at least on the surface, I saw a lot of takes on this being negative for the token addressable market size of Anthropic, because this kind of showcases that we really cannot provide users, say in Russia, China or any country linked to any of these countries with access to the best model on earth. Having said that, so you could argue that it limits the upside. Having said that, this is also a crystal clear example of, of this being an arms race between superpowers. Right? We know that China is actively funding some of the bigger LLMs in China. Maybe the US will actively start funding some of the companies in the US soon, But at the very least I consider this a more or less statement that these models have become too big to fail. Because this is ultimately a race towards AGI, a race towards winning that competition on a sovereign scale. And therefore it is highly unlikely that the financing concerns that we've had around anthropic and OpenAI, mostly around OpenAI, obviously that those financing concerns are really something you should care about, given that the public sector will likely be involved or get involved, should push come to shove here. So in my opinion, this export curb and the statement that followed both decreased the right hand tail of the distribution of outcomes. Maybe the ultimate total addressable market size went down as a consequence of this export curve, but it also took a lot away, a lot of the risk of a left tail scenario here. Because yeah, we're probably talking about models that are too big to fail by now. And therefore, if you look at the combined projection going forward for revenues from Anthropic and OpenAI. I just did a hypothetical example. I think the red scenario is basically what's in play now compared to the light blue scenario which also contains some adverse scenarios before the statement. And by the end of the day I think this is benign news for these half glass empty types that typically recite many of the portfolio manager positions around the world because they've been very scared of the left tail with this extremely expansionist build out. While if the government is effectively providing a put, then obviously the left tail is not as scary as it was. So therefore, even though the outcome space has been contained here, I actually think that it's net a positive and I'm yet to hear others really saying the same. So let's see how the market prices this over the coming quarter or two. We obviously know that both companies are looking into IPOs in October, so we'll be very interesting to follow. And speaking of IPOs, basically the third most important news was the biggest IPO of all time on Friday, which again goes to show how crazy a weekend this has been. SpaceX did well on Friday and if we look at the IPO pricing, it was obviously very oversubscribed. SpaceX did a 15 20% increase on Friday and we're now seeing live levels closer to 175. So it's a great start to, to the SpaceX journey on, on NASDAQ. And remember that SpaceX will be included in the NASDAQ 100 in 13 names from now, if I'm not mistaken. So we do have these passive flows into SpaceX upcoming still. And my thesis has basically been into this IPO that we would have, you know, almost melt up like price action in SpaceX until the end of the month and then I'm a lot that's certain around the direction of travel in SpaceX from 1st of July onwards roughly. And I still hold that view after what I've watched For the past 48 hours or so here. Having said that, I don't own any SpaceX stocks, I'm not really tempted because I, I consider the price action very tricky to navigate right after an ipo. But I, I think the price action is another example of great appetite for, for growth stocks and I think it's another example of a better liquidity picture than feared by by many. And that's probably what I wanted to discuss as the final topic of the day because SpaceX obviously attempted to raise $75 billion and managed to do so on Friday. And we know that Anthropic and OpenAI will IPO in the fourth quarter, most likely. So in total we're talking about IPO proceeds that will far exceed $100 billion among the three. If we look at total IPO proceeds this year, we'll probably reach 300 billion, something like that, which is a lot also in historical context, but it's actually not a lot if you look at it in a relative context. Because I mean, even though it's obviously nominally the biggest IPO ever, you obviously need to account for the debasement, the inflation that we've seen since over the past decades, et cetera. And if you look at it as a relative size versus the market cap, for example, we're talking overall ish 4% this IPO season of market cap. I think the.com IPO season peaked at plus 10. So is it an extreme IPO season? Sure. Is it a record high? No way. Not even near. And to me it more looks like the year that comes before the, you know, the final year of a cycle. When you look at the IPO dynamics here, it can get crazier than this. In other words, I've had a lot of discussions ahead of the IPOs of Anthropic and OpenAI around the token pricing. Most of you will know that I've referred to the Silicon Data Index on the token pricing over the course of the past weeks since we've seen a tendency towards using marginally cheaper tokens. Let me put it like that, over the past weeks and we've obviously seen a load of blue chips communicating that they've reined in spending on Claude Uber as an example, Microsoft another example. And what we've seen is that the marginal activity has likely moved slightly towards other models. So I could be a little worried that we do see marginal activity moving towards cheaper models ahead of these IPOs. And you know, I'm just thinking out aloud here. I'm not overly tempted to join these IPOs either, at least not now. I'm still much more in the trade of all of the hardware companies delivering to the company's spending so everything from memory to power semis etc and that's the chart I want to conclude this week's Macro Mondays with. Because we did get the trade data from South Korea on page eight for the first 10 days of the month late last week. And even though we do see some, you know, workday changes relative to the first 10 days of June in 2025, we're still talking about a growth of almost 90% year over year in the South Korean exports on page eight. I do know that if you work day adjust this, you probably get something that is slightly less dramatic. But look at it versus the VanEck Semiconductor ETF here, which basically track semiconductor index. I think we have heydays ahead in semiconductors still. And if you want to check my portfolio of semiconductor stocks and the other tradable themes that I have in my portfolio, you need a pro subscription at Real Vision. But yeah, even though we've seen the biggest IPO nominally in history on Friday, I still think there is money left for a rally here. The liquidity situation looks pretty decent until August. And yeah, the inflation alarmists were proven wrong once again. Let's see how the oil market develops from here. It very much depends on whether China will start buying again, but at least for now we're in a surplus in the oil market, which basically no one but us told you a couple of months ago. Thank you for watching this week's Macro Mondays. I'll probably be on my own next Monday as well since Michael is still in Italy, but I hope you enjoyed this solo version of the show and please leave your comments and feedback in the section below the show here and I'll see you next week.
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