MacroVoices #524 Simon White: War + Inflation = More Inflation
March 19, 2026
Host: Erik Townsend
Guests: Simon White (Bloomberg Macro strategist), Rory Johnston (Commodity Context)

Episode Overview

This week’s episode examines the renewed surge in inflation risk resulting from the ongoing Iran conflict, drawing powerful historical parallels between today’s macro environment and the 1970s. Erik Townsend leads an in-depth feature interview with Simon White, who outlines his thesis for a “three act” secular inflation cycle and details why markets may be underpricing the lasting effects of today’s conflict-driven commodity disruptions. The episode also features a critical update from Rory Johnston on the real-world impact of the Strait of Hormuz disruption and ramifications for global oil and food markets. The post-game focuses on portfolio strategies to hedge against food inflation, a risk that both guests highlight as potentially the next shock.

Major Themes and Discussion Points

1. War, Inflation, and Historical Analogies

[04:53–13:22]

• Simon White introduces the idea that inflation plays out in a “three act play,” with the current Iran conflict acting as the catalyst for Act 3—a resurgence of secular (structural) inflation.
• Simon draws strong analogies to the 1970s, especially the Yom Kippur War, noting the market’s complacency about inflation and the underpricing of second-order war effects:
  • Quote: “Inflation is probably the most mispriced thing at the moment...I think the muscle memory is kicking back in that inflation will always go back to target. But I think that's…quite complacent.” (Simon White, 05:56)
• He lays out “Act 1” (initial shock—Vietnam War/fiscal easing or pandemic), “Act 2” (premature all-clear), and now “Act 3” (the risk of renewed, persistent inflation post-shock).

2. Comparing the 1970s to Today

[13:22–21:12]

• Simon and Erik stress the importance of recognizing both similarities and crucial differences between today’s conflict and the 1973 Yom Kippur War.
• Unlike the united Arab oil embargo against the US in the 70s, today’s conflict sees fragmented Middle Eastern alliances and different chokepoints (the Strait of Hormuz vs. an embargo).
• Simon highlights that food inflation’s contribution to CPI in the 1970s was even more significant than energy, and warns of a similar risk now if disruptions persist:
  • Quote: “In the 70s the food shock was actually much bigger than the energy shock…if you have this effect feeding into fertilizer prices…food CPI will start to rise.” (Simon White, 15:35)
• Fertilizer supply vulnerabilities, caused by restricted passage and production in the region, are identified as overlooked transmission mechanisms for the next inflationary surge.

3. The Kinetics of the Current Conflict: How Lasting Is the Damage?

[18:40–23:10]

• The hosts discuss the uncertainty around just how long such chokepoints (as in the Strait of Hormuz) might remain closed, and how “hysteresis effects”—lasting disruptions—grow with conflict duration.
• Simon underscores the self-reinforcing psychological aspect of inflation, warning of expectations and consumer behaviors creating a vicious cycle:
  • Quote: “Are we already at that point in terms of this coming inflation cycle where the fire has been started and can't be put out?”
  • Simon White: “We're already in that. In my view, it's quite clear that what began in 2020…was the beginning of, if you like, that cycle.” (Erik & Simon, 21:12–21:50)
• Yield curve implications: White expects the curve to steepen if the Fed is perceived as dovish and unable to fight persistent inflation—a parallel to Arthur Burns’ approach, not Volcker’s.

4. Implications for Markets: Equities, Gold, and the Risk-Off Playbook

[28:17–41:21]

• Simon remains astounded by the market’s “complacency,” especially in equities, given that valuations are higher than in the 1970s and households are more exposed.
• Defensive positioning and complacency in hedging (e.g., quick reversal of put-buying, falling VIX) are called out:
  • “It still seems to be some sort of complacency…and what draws me to that especially is just looking at what's happened to put skew.” (Simon White, 29:07)
• Gold is analyzed as a hedge against both inflation and financial system risk (“both tails”), but its correlation with geopolitics has recently broken down (e.g., gold down even as oil spikes), possibly due to a rally in the dollar or forced liquidity events.
• The need for a new “risk-off” playbook is discussed: The traditional flight to the dollar and Treasuries may not function the same way as during 2008, given structural changes in global flows.

5. Real-Time Oil Market Consequences: Rory Johnston Update

[52:09–86:15]

• Rory Johnston details how the near-total shutdown of the Strait of Hormuz caught all market experts by surprise, upending years of assumptions about insurance risk and geopolitical “red lines.”
• Quote: “It'll make the 1970s look like child's play. And that is my concern here.” (Rory Johnston, 52:51)
• Main reason for the shutdown: Even with high insurance premiums, the persistent expectation that the conflict will resolve quickly has led shipowners to wait rather than risk transit.
• Johnston models the timeframes and possible outcomes:
  • A year-long closure would create a crisis “bigger than 2008,” requiring demand destruction on the scale of COVID global lockdowns.
  • Even if the strait reopened today, months of supply chain snarls and acute product shortages would persist.
  • If it continues for three more weeks or months, expect oil prices to spiral—$150–200/barrel “easily,” especially in spot benchmarks like Oman and jet fuel in Asia where shortages are acute.
• Notable moment: “The price spike isn’t enough because you still need to shed that much demand from the global system...there is going to be an enormous human cost here.” (Rory Johnston, 61:10)
• Market signals from localized benchmarks (Oman, Oman, Dubai, Asian jet fuel) are forward signals for Brent and WTI—such prices will eventually spread globally if crisis persists.

6. Food Inflation Risks Amplified

[83:22–88:15]

• Both Simon White and Rory Johnston emphasize that food/fertilizer supply chain disruptions may produce an even more persistent inflation shock than energy alone.
• “If this continues, we will see crop yields decline, we will see food production decline, we will see the food that does get to your plate more expensive…This kind of shock…will make the 70s look like child's play.” (Rory Johnston, 83:49)
• The panel connects these risks directly to CPI, inflation psychology, and potential political instability in emerging markets.

Key Quotes & Memorable Moments

• Simon White on Inflation Parallels:
  “It’s very uncanny if we compare the two analogies that almost to the month when you get this sort of premature all-clearing ending is almost the month when the Yom Kippur war started, as when the attacks on Iran started.” (14:13)

• Rory Johnston on Oil Shock:
  “If this continues, it’ll make the 1970s look like child’s play...I just can't imagine the political…any politicians engaging, you know, bearing that political consequence.” (52:51–61:10)

• On Market Complacency:
  “It still seems to be some sort of complacency…and what draws me to that especially is just looking at what's happened to put skew.” (Simon White, 29:07)

• On Food Inflation Transmission:
  “If you have this effect feeding into fertilizer prices…When that starts to rise, it’s a very reliable lead by about six months that food CPI will start to rise. So I don’t think that is also being fully priced in.” (Simon White, 15:35)

Important Timestamps

• [05:39] Simon White lays out the "three act" inflation thesis; compares present moment to 1970s.
• [13:22] Differences and similarities between the Yom Kippur War and the current Iran conflict.
• [15:35] The underappreciated risk of a food price shock and fertilizer supply disruptions.
• [21:12] Discussion of self-reinforcing inflation cycles and the Fed’s likely (in)effectiveness.
• [28:17] Implications for equity markets; the risk of a “complacency trap.”
• [31:27] Gold as a hedge in both inflationary and deflationary (credit event) regimes.
• [52:09] Rory Johnston on Strait of Hormuz shutdown: “I never thought this would happen in my career.”
• [61:10] Modeling potential crisis durations and consequences for global economy.
• [83:32] Fertilizer as an overlooked transmission channel for food inflation.
• [89:24] Patrick Ceresna’s "Trade of the Week": Positioning for food inflation via a long wheat ETF option spread.

Hedging Food Inflation: Trade of the Week

[89:24–92:26]

• Patrick Ceresna recommends expressing the food inflation theme by going long Chicago SRW wheat, using the Tucrium Wheat Fund ETF (ticker: WEAT).
  • “Buy the $25 call for about $2 and sell the $30 call for about $1…risking about 4% of the underlying ETF value to gain exposure for a potential of a $5 payoff…a roughly 4 to 1 payoff ratio over a 212 day window.”

Post-Game Segment: Key Market Takeaways

• Major risk-off indicators: S&P, gold, copper all close at/near lows as of recording, with further after-hours weakness.
• The magnitude and direction of upcoming moves are tied to geopolitical outcomes in Iran; a quick resolution likely reverses recent market declines, but a protracted conflict could “cripple the global economy” (Erik Townsend).
• Dollar strength likely to persist as a flight to safety, though underlying euro/yield differentials matter.
• Gold and copper have both broken key technical support levels; ongoing disconnect between gold and traditional geopolitical events noted.
• Uranium and commodity currencies (Aussie, Canadian) remain relatively resilient, but are vulnerable in an outright market crash.
• The interest rate environment sees the 10-year US Treasury yield at multi-month highs, but ambiguity remains about follow-through.

Summary Takeaways

• The episode emphatically warns that markets are dangerously complacent about inflation, underestimating the second- and third-order effects—especially from food/fertilizer supply disruptions—of the Strait of Hormuz shutdown and the evolving Iran conflict.
• Simon White and Rory Johnston both argue that, unless quickly resolved, the current shock could unleash a level of inflationary pain and supply chain disruption beyond anything seen since the 1970s—with the added risk that global political systems today may be less equipped to handle it.
• Investors are advised (with specific trade structures) to position not only for energy but especially for second-wave food inflation—and to critically reassess traditional “risk-off” plays, given the possibility that old rules may not apply.

Additional Resources

• Simon White’s research via Bloomberg Terminal (Macroscope column, Tue/Thu; Markets Live blog).
• Rory Johnston’s written work and data at commoditycontext.com.
• Full research roundup (interview transcripts, trade deck, further articles) available via MacroVoices registration.

Notable Quotes Recap

• “Inflation is probably the most mispriced thing at the moment...I think that's…quite complacent.” (Simon White, 05:56)
• “It'll make the 1970s look like child's play. And that is my concern here.” (Rory Johnston, 52:51)
• “If you have this effect feeding into fertilizer prices…food CPI will start to rise.” (Simon White, 15:35)
• “This shock, if continued, will make the 70s look like child's play.” (Rory Johnston, 83:49)

For readers who missed this episode: the conversation delivers a sobering warning about the risks lurking behind the headline oil story—especially the highly likely second act of food inflation and the possibility that traditional hedges and risk-off tactics may not work as they did in past crises.