Hormuz Is Most Important for Asia. Less So for U.S.

Dr. Jeffrey Roach, LPL’s Chief Economist, gives insight into the oil market, highlights where construction spending is going, and why recession risks are lower than expected.

Last Edited by: LPL Research

Last Updated: March 27, 2026

Transcript

Jeffrey Roach (00:00):

Hi, I am Jeffrey Roach, Chief Economist for LPL Financial, with three talking points for the current macro landscape. First, Hormuz is most important for Asia, not the U.S. So roughly 20% of the world's oil goes through the strait of Hormuz. However, 90% of that goes to Japan, China, India, and other Asian countries. The numbers on the map signify the flow of barrels per day at various maritime choke points. Now, about 24% of total daily production never boards a ship, but since so much of Asian markets rely on tankers getting through the Strait of Hormuz we shouldn't be surprised that Japan's equity market was seriously impacted by the current conflict. Our view is the longer the strait is blocked, except for mostly Iranian tankers, the more Iran gains as a net exporter and other Middle East producers lose revenue. And further, the fragilities of Japanese markets in particular, remain in effect. Second data center construction outpaces office.

Speaker 2 (01:08):

We're in the early innings of AI utilization rates, especially for healthcare, hotels, and restaurants. So we have a lot more to go on the demand side. Now shifting to the supply side, AI related construction activity is an interesting stat worth monitoring. We recently hit a record in spending on data center construction. Last quarter, businesses spent more on data center construction than general office construction, and the monthly run rate remains higher than office construction. This will have an impact on electricity demand for the foreseeable future. Third, consumers have ability to service the debt. When I'm asked about recession risks, I look at this debt service ratio to give me some of the metrics I need to assess the health of the economy. For now, consumers have fairly low debt servicing pressure, and this ratio that I'm showing here is household debt service payments as a percentage of disposable personal income. And what we see here is mortgage servicing costs are just about approaching pre COVID levels, whereas consumer debt servicing is the lowest since those years of de-leveraging in 2011 and 2012. Well, that's all for now. If you want more insights on global market trends, follow us on social media and take care.

Dr. Jeffrey Roach, Chief Economist, examines the U.S. dollar’s safe‑haven strength amid geopolitical tensions, the economy’s reduced reliance on oil, and how AI-driven innovation is reshaping employment dynamics.

Dollar Benefits from Safe-Haven Status: Recent volatility from Middle East conflict demonstrates the dollar's enduring appeal as a safe-haven asset. The U.S. dollar rallied against the Euro and more notably gained ground against the Swiss Franc despite traditional safe-haven competition.

Federal Reserve research confirms the dollar remains "deeply embedded in global finance" and will likely maintain dominance for the foreseeable future, reinforcing its position during periods of heightened uncertainty.

U.S. Economy Less Reliant on Petroleum: An important shift in the American economy's structure reduces vulnerability to oil price shocks. Oil intensity — measuring barrels of oil consumed per thousand dollars of gross domestic product—has declined significantly, providing a buffer against energy market volatility during geopolitical conflicts.

This reflects a structural shift toward less energy-intensive service sectors and improved energy efficiency across industries, explaining why recent geopolitical conflicts produce more muted economic impacts than historical precedents.

AI Reshapes Workforce Dynamics: Artificial intelligence adoption accelerates across labor-intensive sectors, enabling higher economic growth without proportional job creation. AI tools enhance productivity in healthcare, hospitality, and professional services while reshaping traditional labor market relationships.

Businesses using AI tools to enhance productivity achieve efficiency gains that reduce labor intensity. Labor market dynamics continue to evolve as automation fundamentally changes skill requirements across sectors.

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