Brace For 8% Inflation Again, Cycle 'More Painful Than 2008' | Josef Schachter

TL;DR

Josef Schachter warns a prolonged Middle East war disrupting Hormuz and Qatar's LNG could trigger 5–8% global inflation, worse than 2008.

Key Points

• 1.Brent-WTI spread has blown out to $17–18, its widest in 11 years. Brent reflects shortage of Middle Eastern crude while US WTI supply remains intact; a normal spread is around $5.
• 2.An Iranian missile strike hit Qatar's Ras Laffan LNG complex, the world's largest, responsible for ~20% of global LNG supply. European gas prices jumped 35% at the open following confirmed fires and extensive damage.
• 3.Schachter forecasts 5–8% global headline CPI if the war extends into May–June 2026. He dismisses core inflation (ex-food and energy) as misleading; tanker leasing costs have risen sixfold, feeding into all consumer prices.
• 4.Product prices in Europe and Asia have already exceeded $200/barrel, surpassing the 2008 peak of $147. If WTI reaches $120–$130, Schachter says a global recession becomes likely, consistent with a Wall Street Journal economist survey threshold of $138.
• 5.The Strait of Hormuz is effectively semi-closed; only ~90 ships have crossed since the war began February 28th, versus 100+ per day before. Iran's new Supreme Leader has vowed to keep it shut, and the Houthis have declared the Red Sea fair game.
• 6.Iran is conditioning Hormuz passage on oil being traded in Chinese yuan rather than US dollars. Russia is already selling oil to Japan in yuan; Schachter sees this as a growing but still limited challenge to the petrodollar system.
• 7.Schachter identifies a parallel private credit crisis as potentially larger than 2008. Junk bond spreads are widening, redemptions are being blocked in private debt funds, and AI data center loans are at risk of going over budget with insufficient revenue to service debt.
• 8.Canadian energy stocks are at record highs for the year, up 25–30% from April 2025 lows, with some names doubling or tripling. Schachter favors Canadian oil and gas equities as cheaper on price-to-NAV and price-to-cash-flow versus US peers, and sees natural gas stocks as undervalued relative to oil stocks.
• 9.Schachter calls this supply shock larger than the 1979 Iranian Revolution shock. That event removed ~5% of global supply (4 million barrels/day); the current Persian Gulf disruption affects ~20 million barrels/day, nearly 20% of the 106 million barrels/day consumed globally.