MacroVoices #542 Luke Gromen: As The Conflict Turns
Luke Gromen argues China has demonstrated more geopolitical and economic slack than markets assumed, cutting oil imports 3-4 million barrels/day via EV/solar substitution while growing exports 27% y/y and corporate profits 19-20% YTD, allowing it to prolong the Iran conflict rather than end it. He believes the endgame is a bond-market crisis across the US, Japan, UK, Germany and Korea (all now borrowing to fund defense buildouts) that forces some form of yield-curve control, which is structurally bullish for gold and eventually Bitcoin; on the desk, Patrick Ceresna adds a GLD trade (long at $376, protection $370-$350, capped at $415 via Sept 18 expiry, net cost $1.75/share) and flags S&P 7400 as the key downside pivot toward 7000.
Core argument. Luke Gromen says his high-conviction call that the Strait of Hormuz closure would outlast consensus (into July) played out, but the price response he and Eric Townsend both expected — much higher oil, higher inflation, weaker equities — did not materialize, because China absorbed the shock more effectively than anyone anticipated. His current view: China now has demonstrated the capacity and incentive to let the US stay bogged down in the Middle East conflict rather than help resolve it, because prolonged conflict weakens the US strategically (as it did over 23 years in Iraq) while China quietly builds AI, energy, and industrial dominance.
Mechanism. In H1 2026 China shifted 1.4 million barrels/day of oil demand to EVs and cut overall demand 3-4 million b/d — partly funded by running down its own petroleum reserves — while exports rose 27% y/y (May) and corporate profits are up 19-20% YTD. Gromen frames this as China absorbing pain the US Treasury market couldn't: the MOVE index hit near-dysfunctional levels March 27, with bond and equity volatility peaking and falling within 12 hours in a pattern he attributes to intervention. China's long-stated goal (since 2009) is a
Takeaways / the view: Gromen's stance is that China has more geopolitical and fiscal slack than consensus believed, and it will use that slack to let the Iran conflict, and associated inflation, run rather than help end it, pushing toward a global bond-market crisis and eventual yield-curve control. His base case, and current personal/client positioning, is long gold — he says oil is "too hard," so he simply owns gold — plus US electrical infrastructure equities and Japanese industrial equities, while flagging near-term risk that AI/semis get dragged down if US AI names correct, though he'd expect semis higher longer term. On the desk, Patrick Ceresna translates the gold thesis into a defined trade: long GLD at $376 with protection from $370 down to $350 and upside capped at $415 (Sept 18 expiry, net cost $1.75/share), while watching S&P 7400 as the level that would trigger CTA selling toward 7000.
On the record
| Claim | Speaker | Expression | Horizon | Hedge | At | Status |
|---|---|---|---|---|---|---|
| Gromen expects China to continue letting the Iran conflict and its inflationary spillovers run rather than help end it, because a US bogged down in prolonged Middle-East war strategically benefits China (as the 23-year Iraq war did) while China quietly builds AI, energy, and industrial dominance. | Luke Gromen | — | — | base-case | 00:15:56 | OPEN |
| Gromen forecasts that persistent war-driven inflation, combined with simultaneous defense-spending borrowing binges by the US, Japan, UK, Germany, and Korea, will push global bond markets toward crisis, eventually forcing some form of implicit or explicit yield curve control. | Luke Gromen | — | — | base-case | 00:21:43 | OPEN |
| Gromen's base case is that gold goes 'way higher' relative to oil over time as the bond-market crisis and dedollarization/gold-settlement trends unfold; he says calling oil's direction is 'too hard,' so for his own and client money he simply owns gold. | Luke Gromen | gold price (vs oil) | — | base-case | 00:31:41 | OPEN |
| Gromen remains long US electrical infrastructure equities, citing severe power-generation bottlenecks and multi-year, wide-open lead times reported by a private generation-agnostic equipment maker far exceeding what public companies are willing to admit. | Luke Gromen | — | — | base-case | 00:34:16 | OPEN |
| Gromen favors Japanese industrial equities, arguing US reshoring cannot happen without Japan's manufacturing help (China won't help, Korea/Germany only marginally), and views this trend as still early days. | Luke Gromen | — | — | base-case | 00:35:55 | OPEN |
| Gromen expects that if US AI stocks correct, semiconductors get dragged down alongside them near-term (a dip he'd view as a buying opportunity), but over a longer, roughly five-year horizon he expects Chinese semiconductor competition to turn 'cheaper and better' (as happened in Rust Belt industries), pressuring the multiples on US semis even though he still expects semis to end up higher longer term. | Luke Gromen | — | — | hedged | 00:39:14 | OPEN |
| Patrick's trade of the week is long GLD at around $376, with downside protection effective from $370 down to $350 and upside capped at $415, via the September 18, 2026 expiry, at a net cost of $1.75/share, expressing a bullish-but-hedged gold view after gold's ~30% correction. | Patrick Ceresna | GLD price between 350 | 2026-09-18 | base-case | 00:46:54 | OPEN |
| Ceresna flags S&P 500 7400 as the key downside pivot to watch; a sustained break below that level, given rising CTA/systematic sell triggers, could spur a feedback-driven correction down toward 7000. | Patrick Ceresna | S&P 500 index < 7400 | 2026-08-15 | hedged | 00:50:42 | OPEN |