William Stern on the Strait of Hormuz, Oil Prices, Inflation, and Geopolitical Risk

William Stern is an entrepreneur, investor, and small-business finance executive best known as the founder and CEO of Cardiff, which he launched in 2004 to expand access to capital for entrepreneurs. Over two decades, he has built Cardiff into a fintech-focused lender while also leading Cardiff Ventures and coaching founders through The Fraternity. Stern is a frequent public speaker, publishes business commentary, and hosts the podcast A Stern Talk, where he interviews leaders about growth, markets, and entrepreneurship. Before founding Cardiff, he held roles at Fisher Investments and Balboa Capital, shaping his finance and lending expertise across volatile business cycles.

In this interview, Scott Douglas Jacobsen and William Stern examine how instability in the Strait of Hormuz can disrupt oil and LNG flows, raise insurance and shipping costs, and intensify supply-driven inflation. Stern argues that central banks cannot solve physical bottlenecks, warning that energy shocks squeeze small and medium-sized businesses far more than large corporations. The conversation broadens to geopolitical leverage, Russia, Iran, Europe, and the weaponization of energy corridors as tools of economic pressure. Together, Jacobsen and Stern frame energy markets as a central junction where conflict, trade, inflation, and strategic competition converge across the modern global economy.

Scott Douglas Jacobsen: Geopolitical conflagrations can sometimes significantly impact markets. With the recent strikes on Iran, the death of Ali Khamenei, and Iran's subsequent retaliation, the Strait of Hormuz has become a severe shipping chokepoint. Several commercial vessels have been damaged in attacks, and traffic through the strait has been heavily disrupted. So when roughly 20% of the world's oil supply passing through that corridor is threatened, even for a few days, what does that do to markets?

William Stern: It is interesting. I just posted about this on LinkedIn. By the way, I like what you said about it being a conflagration. Nobody uses that word enough. It is a great word. It reminds me of that meme of the dog sitting in a burning room, holding a cup of coffee and saying, "Everything is fine," while the walls are on fire.

It is not only about 20% of global oil consumption; around one-fifth of global LNG trade also passes through the Strait of Hormuz. Everything moves through the same narrow passage, the same artery.

It is better not to say that Iran has formally shut down the Strait of Hormuz. The more accurate description is that the conflict has made passage far more dangerous and commercially disruptive. Marine insurers in the London market have continued to offer coverage, but at sharply higher war-risk premiums, and the high-risk zone has been widened.

It is also better not to say that the United States and Israel have sunk a dozen Iranian ships. The more supportable claim is that, since the latest escalation, multiple commercial vessels have been hit in Gulf attacks, and several ships have been damaged.

Still, the broader economic point stands. A great deal of oil and LNG passes through that corridor, and disruptions there can force rerouting, delay shipments, and raise shipping and insurance costs. When a chokepoint like Hormuz becomes unstable, energy prices around the world feel it quickly.

Are you aware of the Lloyd's of London issue, by the way?

Jacobsen: No.

Stern: Lloyd's of London is a historic insurance marketplace that has been central to marine insurance for centuries. The accurate version here is that Lloyd's did not stop underwriting cargo ships in the Strait of Hormuz. Coverage has remained available through the London market, although rates have risen sharply and insurers have expanded the area considered high risk.

Jacobsen: I read about that.

Stern: Right, and that is where it becomes interesting. The United States government has explored measures to support maritime trade in the region, including possible naval escorts and political risk insurance guarantees. But that is different from saying that commercial insurance disappeared entirely.

It is also more accurate not to claim that a specific number of ships are stranded in the strait. Reports indicate that a large number of vessels have been waiting in the wider Gulf region while companies assess security risks and insurance costs.

So we have oil, liquefied natural gas, and a global economy waiting to see whether this becomes a short disruption or a longer supply shock. This is where inflation comes into play.

I made a post. I said, "Jerome Powell cannot print cargo ships." That line is blunt, but the logic is correct. If a supply disruption is driving inflation at a maritime chokepoint, central banks cannot simply create shipping capacity or reopen a dangerous sea lane.

Most people think inflation is just one thing: prices going up. In reality, there are two broad types. Demand-driven inflation occurs when consumers have too much cash chasing too few goods. Central banks can slow that by raising interest rates and making borrowing more expensive.

But that is not what is happening in a situation like this.

What we are looking at is a supply-driven shock. When energy flows through a chokepoint like the Strait of Hormuz is threatened, prices for oil and liquefied natural gas rise because the supply chain itself is under stress. Lowering interest rates does not fix a physical bottleneck in global shipping.

Then prices inevitably rise. That only exacerbates the situation and pours gasoline on the fire. It pushes the economy deeper into the inflationary environment that has persisted since the COVID-19 pandemic. When energy prices spike, the cost of manufacturing and transportation rises with them. The reality is that you cannot rely on the Federal Reserve to solve that problem.

As I said in the LinkedIn post, the Fed cannot underwrite maritime insurance policies or repair a broken global supply chain. It simply does not have tools for that. Cutting interest rates would not provide the relief the market actually needs. Cheaper money would increase demand, and the prices of liquefied natural gas and petroleum would rise further. As a result, the cost of money would likely remain high. The best advice I can give business owners is to keep dry powder on hand and maintain liquidity. I ended my LinkedIn post by saying, "Rising tides raise all ships, unless you are trapped in the Strait of Hormuz."

Jacobsen: Investors who deal with very large capital flows often think in long-term horizons. Do they take into account long-term energy demand, consumption, and the markets surrounding those sectors? If we look at the longer arc, many analyses project declines in the global share of oil, coal, and gas. At the same time, renewables are increasingly reaching cost parity or even becoming cheaper per unit of energy. When 20% of a major energy transit route is suddenly threatened, does that factor into investment decisions? Does it shift capital toward other forms of energy?

Stern: Listen, energy costs do not just raise a monthly electricity bill. They can structurally erode a small business owner's profit margin from the inside out. Are you asking about long-term energy prices, or about short-term pressure from supply disruptions?

Jacobsen: That is a good point. I am thinking in macro terms. If roughly 20% of a major global energy supply stream is disrupted, it can weaken economies that depend heavily on those resources. Countries with capital and technological capacity may accelerate the development of alternative energy sources. Does a shock like this push governments and investors toward that shift?

Stern: I do not necessarily think so. It is an interesting question, but I am not a global energy supply-chain expert. What I can say is that geopolitical decisions often proceed even when the risks are obvious. For example, before Russia's full-scale invasion of Ukraine, some argued that deeper Western involvement with Ukraine would provoke Russia and destabilize the region. Nonetheless, Western countries supported Ukraine, and Russia reacted with a major war. You are in Ukraine now, so you experience the consequences of that geopolitical tension directly.

The war has produced enormous casualties. Estimates of total casualties vary widely, but many analyses suggest well over a million casualties on the Russian side alone, including both dead and wounded. If one combines the casualties on both sides, the total is likely much higher.

Jacobsen: That number is often misunderstood. The figures cited in public discussions usually refer to total casualties, not deaths alone. In military reporting, "casualties" typically include both killed and wounded personnel. The number of deaths is generally a fraction of that total, often estimated using ratios such as three wounded for every one killed. However, the precise numbers remain uncertain and are difficult to verify independently during an ongoing war. Although people sometimes inflate the figures and repeat the number of 1.2 million without clarifying what it represents. It is a horrible conflict. It is the largest war fought on European territory by European states since the end of the Second World War, which is remarkable.

Stern: We can see some ironic policy consequences. Germany is the best example. For many years, Germany emphasized a transition toward green energy and reduced domestic reliance on fossil fuels. At the same time, however, it became increasingly dependent on natural gas imports from Russia.

When Russia reduced and eventually cut off gas supplies after the invasion of Ukraine, Europe faced a major energy crisis. The reduction in Russian gas exports led to sharp price increases and raised concerns about energy shortages across the continent.

Given what is happening in global petroleum markets now, the key issue is uncertainty. Markets and consumers dislike uncertainty. Bringing the conversation back to the economy, one way to look at it is through the difference between large corporations and smaller businesses.

Large multinational retailers have significant influence and resources. They operate internationally and can hedge fuel costs years in advance using financial instruments. For example, companies with global supply chains often hedge exposure to oil and transportation costs through futures contracts.

By contrast, small and medium-sized businesses do not have those tools. They experience cost increases immediately. When fuel prices rise, logistics providers and suppliers quickly impose fuel surcharges on shipments. The business operator must absorb those higher costs.

If the business passes those costs directly to consumers, it risks losing market share. If it absorbs them, profit margins shrink. In many cases, it becomes an unavoidable financial strain.

There is little that policymakers or central banks can do in the short term to resolve disruptions in global oil flows. The situation becomes even more complicated when viewed in a broader geopolitical context.

For instance, Russia has been one of China's largest oil suppliers. Iran has also supplied significant volumes of oil to China despite sanctions. Venezuela has at times exported oil indirectly through complex shipping arrangements that obscure the origin of cargoes.

From a strategic perspective, countries sometimes attempt to rebalance global influence through economic pressure rather than direct military conflict. In many cases, affecting a rival's economy can be more effective than fighting a conventional war. Energy flows, and supply chains can become tools in that economic competition.

In that sense, disruptions in oil supply can serve as economic pressure in larger geopolitical rivalries. Energy chokepoints, sanctions, and shifts in global supply networks can influence economies without a single shot being fired.

That is why energy markets often sit at the center of geopolitical strategy. They connect international politics, economic competition, and global business in ways that can quickly ripple through the entire world economy.

I do not know whether you remember, but in the United States, a man named George Floyd was killed in Minneapolis, Minnesota, in May 2020 during a police arrest. Floyd had been suspected of using a counterfeit $20 bill at a convenience store. During the arrest, a police officer knelt on Floyd's neck for several minutes while he was restrained. Floyd later died, and the incident sparked nationwide protests and international demonstrations concerning policing and racial justice. I was not sure how widely it was covered internationally.

Jacobsen: The United States sometimes operates within a media environment that is quite self-referential. The country represents roughly 4 percent of the world's population, yet American media coverage can create an echo chamber that amplifies certain events as if they dominate the entire global conversation.

One way to think about it is similar to the Mercator projection in cartography. The Mercator map distorts geography by making regions near the poles appear much larger than they actually are. Comparably, media ecosystems can distort proportional attention. Events in some countries receive intense coverage, while conflicts elsewhere receive relatively little.

For example, there are often numerous active conflicts around the world at any given time - major wars as well as smaller armed conflicts. In the United States, public attention often focuses primarily on a few of them, such as the war between Russia and Ukraine.

But other conflicts have produced enormous casualties with far less global attention. The Tigray War in Ethiopia, which lasted from 2020 to 2022, is one example. Estimates of the total death toll vary widely, but some analyses suggest hundreds of thousands of deaths, including those caused by fighting, famine, and lack of medical care.

I learned about it from colleagues during lunch. Unfortunately, conflicts in parts of the world with less economic influence or media presence often receive less sustained international attention. It is a harsh reality of global media coverage.

Stern: Returning to the earlier discussion about geopolitical "dominoes," the issue often comes down to economic leverage. Countries sometimes attempt to influence rivals not through direct warfare but through economic pressure - sanctions, trade restrictions, and control over energy flows.

For example, energy supply disruptions can create economic chokepoints. When a country's access to fuel or trade routes is restricted, the consequences can ripple through its entire economy. In geopolitical strategy, these chokepoints can function as tools of influence.

Jacobsen: In other words, economic pressure rather than direct military confrontation.

Stern: Control over energy flows, shipping lanes, and financial systems can become instruments of strategic competition. These tools can reshape alliances and influence global markets without conventional battlefield engagements.

When analysts talk about "moving pieces on a geopolitical chessboard," they often refer to economic and strategic pressures. Energy markets, trade networks, and supply chains all intersect with political power.

Oil-producing states illustrate this dynamic. Countries such as Iran, Venezuela, and others possess large hydrocarbon reserves, and the revenues generated from those resources can influence regional politics and international relationships.

For instance, Iran exports crude oil and condensates, and those revenues can affect regional power dynamics. In the Middle East and surrounding regions, energy production and energy trade remain deeply intertwined with geopolitical strategy.

In short, energy resources, economic pressure, and geopolitical competition are tightly linked. When disruptions occur, whether through sanctions, conflict, or the control of strategic chokepoints, their effects can reverberate across global markets and political systems alike.

Why are they even involved? Iran increasingly appears isolated in this situation. Returning to the energy issue we were discussing, Germany provides an illustrative example. When Russia invaded Ukraine, the message from Moscow was that Europe depended heavily on Russian gas. The implicit warning was that if European countries opposed Russia's actions, energy supplies could be restricted. Russia has historically used energy exports as geopolitical leverage, particularly because it was one of the largest suppliers of natural gas to continental Europe before the war.

Since the invasion, European governments have moved to reduce that dependence by diversifying energy supplies, importing more liquefied natural gas, and expanding renewable energy capacity. But at the start of the crisis, Russia's leverage through energy exports was significant.

Russia's position as a major energy supplier gave it the ability, at least in theory, to threaten reductions in supply to countries that opposed its policies. Whether those threats are always intended literally or are partly political signalling is another question, but the potential leverage exists because of Russia's role in global energy markets.

To Iran, some observers have compared its regional posture to a situation in which tensions escalate across multiple actors at once. Commentators and analysts sometimes use colourful metaphors to describe that dynamic. The concern is that Iran's actions or retaliatory measures could widen regional instability.

What makes the situation complex is that many of the countries affected are interconnected through trade, diplomacy, and security arrangements. Some states in the Persian Gulf, such as the United Arab Emirates and Qatar, have at times played diplomatic roles in regional negotiations or served as intermediaries in communications among governments that do not speak directly to each other.

At the same time, the region contains numerous military bases and alliances. The United States maintains military facilities in several Gulf states, and Turkey, for example, is a member of NATO. If tensions spread to countries tied into large alliance systems, the geopolitical implications become much more serious.

When conflicts risk drawing in countries linked to alliances like NATO, analysts begin discussing the possibility of wider escalation. That does not mean such escalation is inevitable, but it raises the stakes.

Returning to the economic side of the discussion, the Strait of Hormuz remains critical. Roughly one-fifth of the world's oil trade and a significant portion of global liquefied natural gas shipments pass through that narrow waterway. Even partial disruptions there can push energy prices higher.

If those disruptions persist, they can fuel inflation globally. Central banks such as the U.S. Federal Reserve have limited ability to address inflation caused by supply shocks in energy markets. Monetary policy can reduce demand, but it cannot immediately restore disrupted supply routes or increase the physical availability of energy.

I could go deeper into how rising energy prices affect businesses, particularly smaller firms. Energy costs can ripple through supply chains, increasing transportation, manufacturing, and operating expenses. If disruptions in oil and natural gas markets persist, they could create broader economic stress.

In other words, if energy markets remain unstable for an extended period, the global economy could face significant pressure. Energy remains a foundational input for nearly every sector, and fluctuations in its price influence everything from industrial production to consumer goods. When energy markets tighten, the effects spread quickly across the entire economic system.

Jacobsen: So Lloyd's of London is essentially staying out of the situation for now?

Stern: Yes, more or less stepping back. You could say they are metaphorically hiding under their desks. When uncertainty reaches a certain level, risk markets tend to pull back. In insurance and finance, that kind of reaction is fairly common during moments of major geopolitical instability.

Jacobsen: Thank you very much for the opportunity and your time, Will.

Scott Douglas Jacobsen is a blogger on Vocal with over 130 posts on the platform. He is the Founder and Publisher of In-Sight Publishing (ISBN: 978–1–0692343; 978–1–0673505) and Editor-in-Chief of In-Sight: Interviews (ISSN: 2369–6885). He writes for International Policy Digest (ISSN: 2332–9416), The Humanist (Print: ISSN, 0018–7399; Online: ISSN, 2163–3576), Basic Income Earth Network (UK Registered Charity 1177066), Humanist Perspectives (ISSN: 1719–6337), A Further Inquiry (SubStack), Vocal, Medium, The Good Men Project, The New Enlightenment Project, The Washington Outsider, rabble.ca, and other media. His bibliography index can be found via the Jacobsen Bankat In-Sight Publishing. He has served in national and international leadership roles within humanist and media organizations, held several academic fellowships, and currently serves on several boards. He is a member in good standing in numerous media organizations, including the Canadian Association of Journalists, PEN Canada (CRA: 88916 2541 RR0001), Reporters Without Borders (SIREN: 343 684 221/SIRET: 343 684 221 00041/EIN: 20–0708028), and others.