Here's a revised version of the previous post comparing financial assets with physical assets, that integrates the Strait of Hormuz crisis as a central catalyst.
Overview: Hormuz And The Return Of Physical Reality
For decades investors focused on financial assets, debt and digital wealth. The closure of the Strait of Hormuz in February 2026 was a reminder that civilisation still runs on physical systems. Energy, shipping, minerals, food and infrastructure remain the foundations upon which all financial claims ultimately depend. When those foundations are disrupted, markets rediscover the real economy.
Rotate from financial assets into physical
1. Rotate From Financials Into Physical
On 28 February 2026 something happened that may come to be seen as one of the defining economic events of the decade.
The Strait of Hormuz, through which roughly a fifth of global oil trade normally passes, effectively ceased functioning as a normal commercial artery following the outbreak of war between Iran, Israel and the United States. Shipping volumes collapsed, insurance costs exploded and hundreds of vessels became stranded across the Gulf.
For years investors spoke about geopolitical risk.
Suddenly geopolitical risk became physical reality.
The event exposed something deeper than a temporary energy shock.
It revealed how dependent the global economy remains upon a relatively small number of physical systems.
And it reminded investors that civilisation ultimately runs on molecules, minerals, energy, food and logistics rather than on financial claims.
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2. Forty Years Of Financialisation
For much of the last four decades capital flowed disproportionately into financial assets.
Debt expanded.
Asset prices rose.
Derivatives multiplied.
Private equity grew.
Property boomed.
Government deficits widened.
Meanwhile many sectors of the physical economy experienced chronic underinvestment.
Mining investment stagnated.
Refining capacity declined.
Electric grids aged.
Nuclear programmes stalled.
Water infrastructure deteriorated.
Commodity sectors became deeply unpopular among investors.
The message from markets was clear:
Financial assets appeared superior to physical assets.
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3. Hormuz Was A Warning Signal
The Strait of Hormuz crisis exposed the fragility of that assumption.
Within days of the disruption, tanker traffic reportedly fell by more than 90%. Oil prices surged. Shipping costs rose dramatically. Insurance markets became stressed. Energy-importing nations scrambled to assess supply risks.
The important lesson was not merely about oil.
The lesson was about dependency.
Modern economies depend upon highly concentrated physical systems.
A handful of maritime chokepoints.
A limited number of mines.
A relatively small number of energy-producing regions.
A narrow set of supply chains.
When these systems fail, financial markets suddenly rediscover the physical world.
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4. The Physical Economy Reasserts Itself
The modern economy often creates the illusion that wealth is primarily digital.
Stocks appear on screens.
Bank balances appear as numbers.
Trillions of dollars move electronically around the world each day.
Yet beneath these abstractions sits a physical foundation.
Data centres require electricity.
Electric vehicles require copper.
Agriculture requires fertiliser.
Semiconductors require energy, chemicals, helium and water.
Military systems require steel, rare earths and explosives.
Nothing exists independently of the physical economy.
The Hormuz crisis served as a reminder that financial systems remain downstream from physical systems.
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5. Inflation Is Often A Physical Phenomenon
Many economists treat inflation primarily as a monetary issue.
Money supply matters.
Interest rates matter.
Credit conditions matter.
But physical scarcity matters too.
If energy becomes constrained, almost everything becomes more expensive.
Transport costs rise.
Food costs rise.
Industrial production costs rise.
The closure of a major energy corridor therefore becomes more than a regional geopolitical event.
It becomes a global inflationary event.
That is precisely why markets react so violently to developments in Hormuz.
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6. The Rotation Into Physical Assets
If the world is entering a period characterised by:
• supply constraints
• geopolitical fragmentation
• rearmament
• energy insecurity
• food insecurity
• industrial reshoring
• infrastructure renewal
then investment leadership may gradually change.
The beneficiaries may increasingly be companies controlling scarce physical assets.
Energy producers.
Pipeline operators.
Grid infrastructure.
Copper miners.
Uranium producers.
Fertiliser manufacturers.
Agricultural businesses.
Water systems.
Shipping infrastructure.
The market may begin assigning higher valuations to assets that are difficult to replicate and essential to societal functioning.
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7. Financial Claims Versus Real Assets
Financial assets are ultimately claims on future production.
But future production itself depends upon energy, materials, labour and infrastructure.
If physical constraints become more binding, then the relative value of real assets may increase.
This does not imply that stocks or bonds become worthless.
Nor does it imply civilisation is collapsing.
Rather it suggests that the balance between financial claims and physical productive assets may be shifting.
The past forty years rewarded ownership of financial assets.
The next decade may increasingly reward ownership of strategic physical assets.
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8. A New Investment Question
For many years investors asked:
"Which financial assets should I own?"
A different question may now become more important.
"What physical systems does the world desperately need more of?"
Energy.
Electricity.
Food production.
Industrial metals.
Water infrastructure.
Transport capacity.
These are not fashionable themes.
They are civilisation themes.
The Strait of Hormuz crisis did not create these realities.
It merely exposed them.
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9. Conclusion
The significance of Hormuz extends far beyond the Gulf.
It represents a warning from the physical economy.
For decades the world assumed that finance, technology and globalisation had largely conquered scarcity.
Events since 28 February suggest otherwise.
The real economy has returned to centre stage.
The world still depends upon energy flowing through narrow waterways.
Ships carrying raw materials.
Mines extracting copper.
Farmers producing food.
Engineers maintaining infrastructure.
The financial economy remains important.
But it sits atop a physical foundation.
When that foundation becomes stressed, capital eventually notices.
The great investment rotation of the coming decade may not be from one stock market sector to another.
It may be from financial claims back towards the physical systems that make civilisation possible.
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Glossary
Financialisation - the growing dominance of financial markets and debt-based activities within the economy.
Physical economy - the system that produces tangible goods and services such as energy, food, materials and infrastructure.
Chokepoint - a narrow strategic location through which critical trade or transport flows must pass.
Real assets - tangible productive assets such as energy reserves, mines, farmland, pipelines and infrastructure.
Supply constraint - a limit on the availability of goods, materials or productive capacity.
Strategic resource - a resource considered essential for economic stability, industrial production or national security.The deeper argument here is not really about Hormuz itself. Hormuz functions as a symbol of something larger: the return of physical constraints after decades in which markets behaved as though finance could indefinitely outrun geology, energy and industrial capacity. The closure simply made that reality impossible to ignore.
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