The Warning Signs of Economic Armageddon Are Here

Shocks are hitting the global economy at once. They are escalating and interacting, driving a commodity spiral that may only culminate in an inflationary blow-off.

Global bond markets are feeling the impact, leaving central banks with a tough dilemma. Yields on 10-year US Treasuries have exceeded 5%, breaching the US Treasury Secretary’s defenses.

The Bloomberg Commodity Index has risen 48% this year, affecting sectors like energy, industrial metals, and grains. Shipping costs have also surged; Lloyd’s List reports that the daily charter rate for a large VLCC oil tanker has hit $1 million (£740,000), eight times higher than in January.

“What is happening is unprecedented,” said the head of shipping at Poten & Partners. The futures markets no longer expect a quick return to normal, as they did in the early weeks of the Iran war. Brent futures contracts are now priced over $90 a barrel through spring 2027.

European gas futures are three times higher than last winter. Wheat, maize, and soybeans are in “contango,” with futures prices exceeding current spot prices. The conflicts in Iran and Ukraine, driven by misjudgment from outdated leaders, are disrupting global petroleum, gas, and grain markets.

Iranian-controlled militias in Iraq have escalated tensions by bombing the Saudi East-West pipeline, which facilitates Aramco oil transport away from the Strait of Hormuz. We are entering a new phase of the oil supply squeeze, with reserves exhausted and U.S. commercial stocks at Cushing down to 22 million barrels.

The scale of strategic failure is astounding. Ukrainians are successfully targeting Russian refineries with drone strikes on critical distillation towers. One-third of Russia’s refining capacity is now offline, prompting Putin to suspend exports of petroleum distillates and forcing Russia to import diesel from India, competing in the global market.

The focus has shifted to diesel, petrol, and jet fuel, which significantly impact inflation. In New York, the diesel “crack spread” has surged to record levels, equivalent to oil at $190 per barrel. Over the past year, diesel prices have risen from $3.72 to $6.23 per gallon. Diesel powers tractors, harvesters, trucking, construction, and more.

The diesel crisis is leading to reduced planting on unprofitable fields, exacerbating the projected food shortage for 2027. Meanwhile, drone and missile attacks have cut off two-thirds of grain shipments from the Black Sea, a vital grain supply region. Putin’s attacks on grain silos and warehouses are adding to the crisis.

El Niño is developing in the Pacific’s warm waters. A study published in the journal Science by researchers from Dartmouth concluded that the El Niño event of 1997-1998 resulted in global income losses of $5.7 trillion (£4.9 trillion) due to a chain reaction of complex effects. This El Niño appears to be stronger than that one.

The world is facing reduced food stocks due to droughts in Europe and the US, alongside a political climate of resource nationalism and food hoarding. Insurers at Allianz warn that the policy responses, not El Niño itself, may cause the most damage.

Meanwhile, investment is surging in artificial intelligence, advanced chips, and data centers, along with the essential electrical infrastructure to support this $20 trillion network, raising concerns about potential risks to humanity.

AI is expected to be deflationary, but currently, it is driving inflation by consuming resources and capital needed to address fiscal deficits in the U.S., Japan, and Europe. Eventually, the conflicts will ease, and oil will return to the market.

El Niño is expected to peak in November and end by mid-2027. Frustrated citizens will regulate Silicon Valley and limit data centers. Competition from cheaper Chinese AI start-ups will hinder OpenAI and Anthropic’s revenues. This will lead to a US economic bubble burst, triggering a recession and causing bond yields and oil demand to drop.

Proverbs 22:7 The rich ruleth over the poor, and the borrower is servant to the lender.

Luke 16:11 If therefore ye have not been faithful in the unrighteous mammon, who will commit to your trust the true riches?

Proverbs 6:6 Go to the ant, thou sluggard; consider her ways, and be wise:

Proverbs 6:7 Which having no guide, overseer, or ruler,

Proverbs 6:8 Provideth her meat in the summer, and gathereth her food in the harvest.

Proverbs 6:9 How long wilt thou sleep, O sluggard? when wilt thou arise out of thy sleep?

Proverbs 6:10 Yet a little sleep, a little slumber, a little folding of the hands to sleep:

Proverbs 6:11 So shall thy poverty come as one that travelleth, and thy want as an armed man.

1 Timothy 6:10 For the love of money is the root of all evil: which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrows.

Hebrews 13:5 Let your conversation be without covetousness; and be content with such things as ye have: for he hath said, I will never leave thee, nor forsake thee.

Matthew 6:19 Lay not up for yourselves treasures upon earth, where moth and rust doth corrupt, and where thieves break through and steal:

Matthew 6:20 But lay up for yourselves treasures in heaven, where neither moth nor rust doth corrupt, and where thieves do not break through nor steal:

Matthew 6:21 For where your treasure is, there will your heart be also.

Matthew 6:24 No man can serve two masters: for either he will hate the one, and love the other; or else he will hold to the one, and despise the other. Ye cannot serve God and money.

1 John 2:15 Love not the world, neither the things that are in the world. If any man love the world, the love of the Father is not in him.

1 John 2:16 For all that is in the world, the lust of the flesh, and the lust of the eyes, and the pride of life, is not of the Father but is of the world.

1 John 2:17 And the world passeth away, and the lust thereof: but he that doeth the will of God abideth for ever.

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