While markets continued debating whether the “Epic F**k Up” was finally ending, the reality inside global storage facilities looked far less comforting: crude inventories kept collapsing toward levels where the issue was no longer price, but whether the system could physically function at all.

According to JPMorgan Chase projections, inventories were expected to fall toward 7.6 billion barrels by June 2026 — the so-called operational stress level — before approaching 6.8 billion barrels by September, effectively the minimum needed to keep pipelines pressurized and refineries operating. Below that threshold, the conversation shifts rapidly from “$90 or $110 oil” to the far more awkward question policymakers prefer to avoid: what happens when fuel infrastructure itself starts breaking down?

Global inventories for major fuels are in the same mood, now sitting at, or below, the lowest seasonal levels of the past five years — just in time for the Northern Hemisphere’s peak summer demand season, because apparently the global energy system enjoys living dangerously. Gasoline inventories looked “reassuring” a few months ago, peaking at their highest levels since 2019 in February, only to perform a spectacular disappearing act by May and fall below the lowest levels seen for this time of year in more than a decade. But markets remain calm, reassured that shortages are surely just another “transitory” phenomenon.

In short, the global economy now has roughly four months to magically rediscover diplomacy before every major market on Earth reprices simultaneously. Energy, food, shipping, manufacturing — all remain tied to the same rapidly shrinking inventory curve that policymakers are still pretending is perfectly “manageable.”
But for now, markets remain comforted by reassuring press conferences explaining that shortages, inflation, and geopolitical escalation are all somehow a non-event.

As the Empire continues exporting “democracy” through regime-change adventures, more countries are inevitably concluding what Pyongyang understood years ago: in the modern Orwellian rules-based order, the ultimate despot survival package is not human rights — it is nuclear deterrence. On cue, North Korea quietly updated its constitution to authorize an automatic nuclear strike if Comrade Kim is assassinated or if the country’s nuclear command system is threatened. The message was refreshingly straightforward by diplomatic standards: if leadership disappears, so does everyone else. Iran, apparently, provided the latest reminder that in the global security marketplace, nuclear weapons remain the closest thing to a lifetime insurance policy.

https://www.reuters.com/world/china/north-korea-revises-constitution-drop-references-unification-korean-peninsula-2026-05-06/

As Confucius almost certainly never said, “When oil burns in the Middle East, factory prices rise in the Middle Kingdom.” China’s producer inflation surged at its fastest pace since the pandemic as the Iran war sent energy and commodity costs soaring, officially ending years of factory deflation and reminding investors that globalization works beautifully right until shipping lanes catch fire. Yet while AI-driven demand for semiconductors and integrated circuits exploded, helping high-tech exports surge, many Chinese manufacturers now find themselves trapped between rising input costs and consumers still reluctant to spend, a situation ancient scholars would describe as “the margin is squeezed from both Heaven and Earth.” Copper, oil, chemicals, and AI chips all became more expensive simultaneously, proving once again that in the modern economy even artificial intelligence ultimately depends on mines, pipelines, and geopolitical chaos.

As everyone knows, “The wise investor watches not the headlines, but the spread between costs and prices.” And unfortunately for China equity bulls, the spread between core CPI and core PPI just reached its worst level since February 2021 — precisely when the Middle Kingdom entered its second wave of the Covid “great harmony campaign,” triggering a derating of Chinese equities that lasted until October 2022. Once again, margins appear to be discovering the ancient Chinese art of suffering in silence.

In a nutshell, when shipping lanes burn and margins vanish, even AI cannot save the Middle Kingdom from the ancient curse of rising costs and reluctant consumers.

The Macro Butler was back on Asharq Bloomberg to explain why the oil prices flashing on traders’ screens still look suspiciously calm while the physical market is quietly screaming shortages.

Global oil inventories have already entered operational stress territory — and if the Strait of Hormuz stays “closed for geopolitical maintenance” for another three months, the world may discover that pipelines and refineries run on actual barrels, not central bank optimism and PowerPoint slides.

https://themacrobutler.substack.com/p/interview-with-asharq-bloomberg-tv-663

The fourth CPI print of the year delivered exactly what Wall Street ordered: a beautifully airbrushed +0.6% MoM, while YoY inflation came in at +3.8% — just a tiny “unexpected” upgrade from last month’s +3.3%. Apparently, inflation is only transitory when you zoom out far enough. Underneath the soothing headline theatre, food inflation slowed from its fastest annual surge since September… only to remain the hottest since November — and that’s before fertilizer shortages begin turning grocery aisles into luxury boutiques. Meanwhile, energy prices bounced back to their highest yearly increase since November 2022, because nothing says “price stability” quite like paying more for literally everything that moves.

Welcome to the opening act of Inflation Wave 2. Once fertilizer shortages and energy shocks fully leak into the data, consensus economists may finally have to retire the word “temporary” for good.

Core CPI delivered another thrilling episode of “nothing to worry about”: +0.4% MoM and +2.8% YoY, conveniently landing just above forecasts and last month’s reading — because apparently inflation persistence is now considered a sign of economic resilience.
The real star of the performance was core services, the 76%-of-the-basket heavyweight that policymakers keep insisting is “normalizing.” Instead, it quietly accelerated to +2.48%, its highest level since last September. But don’t worry, we’re assured this is all perfectly manageable as long as nobody looks at the trend. Translation: inflation is behaving impeccably right before fertilizer shortages, energy spikes, and petrochemical supply-chain chaos arrive fashionably late to turn “soft landing” forecasts into collector’s items. Enjoy this brief moment of statistical serenity before the second inflation wave starts surfing straight through the consensus narrative.

In a nutshell, Wall Street keeps celebrating “transitory” inflation while food, energy, and core services quietly rehearse the opening act of Inflation Wave Two.

🤵 The Macro Butler Special Service 🤵

🌐 What begins in the oil market ends on your plate, as rising energy costs quietly turn into a full-blown squeeze on your wallet, your lifestyle, and ultimately, economic stability. 🌐

Read more here: https://themacrobutler.substack.com/p/from-fuel-to-food-the-bite-of-stagflation

Listen to a summary of The Macro Butler Special Service newsletter via podcast on Substack; YouTube; Rumble; Spotify & TikTok.

https://themacrobutler.substack.com/p/from-fuel-to-food-the-bite-of-stagflation-d54

As Wave Two of Trump-era stagflation officially lifted off, the Treasury’s $42B 10Y auction landed at 4.468% — the highest since January and the fourth straight tail — because apparently bond investors are no longer buying the “inflation is dead” cinematic universe.

The 10Y auction internals looked about as healthy as a gas-station sushi roll: bid-to-cover collapsed to 2.40, foreign demand hit its weakest since January, and dealers got stuck holding more paper as global buyers quietly backed away from funding America’s stagflation sequel.

Overall, the auction was a disaster dressed as “healthy demand,” confirming that in an increasingly weaponized world drifting toward Trump-stagflation, the asset once marketed as “risk-free” is quietly becoming one of the riskiest things you can hold in a portfolio.

After another hotter-than-expected “CPLie,” U.S. wholesale inflation surged to its fastest pace since 2022, as war-driven energy prices reminded economists that “disinflation” was apparently just a temporary hallucination. Producer prices jumped 6% YoY, core PPI hit its hottest level in over three years, and transportation costs soared as trucking and fuel expenses exploded higher. In other words: energy, freight, and supply chains are all getting more expensive again — but don’t worry, central bankers still assure us inflation expectations remain “well anchored.”

For equities, the real signal isn’t the comforting media narrative but the spread between core CPI and core PPI — a simple measure of whether companies can protect margins while costs explode underneath them. In April, that spread stayed negative for a sixth straight month and hit its weakest level since May 2022, signalling that input costs are once again rising faster than companies can pass them on. The last time this happened consistently, in 2021–2022, equity multiples compressed hard — despite Washington insisting the economy was “strong” right up until reality showed up with the invoice.

In a nutshell, war-driven inflation is back, corporate margins are getting squeezed again, and while Washington keeps selling “resilience,” markets are quietly replaying the 2022 stagflation horror sequel.

As Trump-era stagflation keeps unfolding in real time, the Treasury’s $25BN 30Y auction made history with a 5.046% yield — because apparently investors now require “inflation survival premiums” to lend money to Washington for three decades.

The Treasury just printed its first 30Y auction above 5% since August 2007 — yes, the same month the quant crash kicked off before the Global Financial Crisis arrived fashionably late. Apparently history doesn’t repeat, it just updates the coupon rate while quants quietly relive their trauma.