$17B in Foreclosures Already — The Recoil Has Begun

Introduction

Rising energy costs have become one of the most consequential economic forces of this cycle, and their impact is rippling far beyond the gas pump. Military conflict in Iran and Lebanon has disrupted global oil supply chains. This led to driving energy prices sharply higher over the past three months. That spike has fed directly into inflation across nearly every asset class, from construction materials to logistics to utilities.

For an economy already stretched by years of elevated interest rates, the timing could not be worse. Energy is not just a line item in a household budget. It is embedded in the cost of everything: the diesel that runs drilling rigs, the fuel that moves goods across the country, the electricity that powers commercial buildings. When energy prices surge, those costs multiply across the entire supply chain.

Commercial Real Estate Is Running Out of Time

For five years, commercial real estate investors have been holding on, waiting for interest rates to fall far enough to make refinancing viable. Lenders have quietly tolerated covenant breaches they would normally have acted on years ago, choosing to avoid taking back distressed assets. That patience is expiring.

President Trump recently signaled that rate cuts are not on his agenda. He also indicated he wants rates to move higher. That statement received surprisingly little media attention, but its implications are significant. The CPI data and current inflation dynamics offer no reasonable basis for rate relief in the next year. For commercial borrowers, that means the relief window they were waiting for may not arrive at all.

What energy costs are doing now is accelerating the timeline. Higher fuel prices mean higher insurance, higher utility expenses, higher replacement costs, and higher construction costs. These are not abstract risks. They are arriving on balance sheets in real time, and banks holding distressed commercial loan portfolios are beginning to take assets back. Estimates of $15 to $30 billion in reclaimed assets are already circulating among industry contacts, and that number is expected to grow.

AI Is Driving a Massive Reallocation

While commercial real estate struggles, one corner of the economy is experiencing something closer to a boom. Data centers and AI infrastructure are drawing enormous capital investment, and anything connected to their construction is thriving. But the broader economic picture is more complicated, and the benefits of that growth are not spreading evenly.

AI is eliminating white-collar jobs at a pace that is difficult to overstate. Law firms, financial services, and professional services industries are discovering they can accomplish the same volume of work with a fraction of the staff, operating five times faster with 80 percent fewer employees in some cases. This is not a projection. It is already happening.

The irony is that the jobs now in shortest supply are in the skilled trades. Welders, plumbers, pipefitters, and HVAC technicians are in high demand precisely because their work cannot be replicated by software. These workers are seeing wages rise as a result. The structural composition of the American workforce is shifting in ways not seen since the 1920s. The downstream effects on consumer spending, housing demand, and tax revenue will take years to fully materialize, but the trajectory is already becoming visible.

Stagflation Is the Word Nobody Wants to Say

The combination of rising costs and uneven growth is beginning to look like stagflation, the most difficult economic environment to navigate because it limits the tools available to policymakers. Inflation is too high to cut rates, but growth is too uneven to raise them without causing additional harm to vulnerable sectors.

Consumers are already pulling back. Discretionary spending is contracting. People are delaying dental visits, putting off elective procedures, and cutting back on dining and entertainment. The businesses that depend on regular consumer spending are feeling it, even as the largest technology and AI-driven companies continue investing as though the macroeconomic environment is irrelevant to them. For companies with access to deep capital markets and stock-based collateral, it largely is. For everyone else, the pressure is mounting.

The Long View: A 5 to 10 Year Reckoning

The forces at work right now are not a short-term disruption. The debt load carried by the United States government, approaching $40 trillion, is a structural drag on the economy that will shape conditions well beyond any single administration. Interest payments on that debt consume resources that could otherwise drive growth, and the cost of carrying that debt becomes more burdensome as rates remain elevated.

The investment landscape that emerges from this environment will be defined by a handful of durable categories: data-driven technology and AI infrastructure, fundamental commodities including mining, lithium, nickel, copper, and oil and gas, and specific categories of real estate with genuine scarcity value. Debt dynamics and sovereign fiscal health will be the backdrop against which all of those investments play out.

The next five to seven years represent one of the most consequential economic periods in recent memory. The decisions made today, about capital allocation, career positioning, and portfolio construction, will compound over that window in ways that are difficult to reverse. In a market where panic is driving investors toward public equities, cryptocurrency, and supposedly distressed real estate, the most disciplined response may simply be to stop, assess the full picture, and act with intention rather than urgency.

Oil and gas consumption is not going down. The demand for raw energy to power AI infrastructure, manufacturing, and everyday life is only increasing. That reality sits at the center of nearly every trend shaping the economy right now, and it deserves to be treated as such.