With Brent crude climbing past $107 per barrel and diesel crack spreads surging to $110 per barrel, the current commodities rally is sounding a deeper alarm: years of systemic underinvestment in physical commodity capacity are transforming what began as a supply shock into a structural inflationary force.

Jeff Currie, former head of commodities at Goldman Sachs and current leader of Real Macro, said in a CNBC interview on Thursday that the latest surge in Brent prices is increasingly difficult to characterize as a transitory disruption. He cautioned that markets are underestimating an inflation cycle driven by a long-term shortage of physical goods. "The old economy is fighting back," Currie stated. "You see it in the rates market, and you see it in the commodities market."

Adding to this view, Paul Bloxham, chief commodities economist at HSBC, released a research note this week warning that a so-called "super squeeze" has commenced, echoing Currie's bullish outlook.

China's returning demand stands as the primary engine behind the oil price increase.

Countering the narrative linking the latest oil rally to escalating Gulf conflicts, Currie said he places greater emphasis on China's re-entry into the market. Following his travels through Singapore and Hong Kong, he noted observing strong Chinese buying interest firsthand.

Currie explained that earlier this summer, China reduced refinery runs and trimmed refined product exports due to tighter crude availability, which partly worsened the global supply crunch for refined fuels. Yet, exceptionally high diesel margins subsequently created a powerful incentive to restart operations, with refineries coming back online and pulling crude demand into an already strained market. "It's like an earthquake," Currie remarked. "They chase the margins, fire those refineries back up, and the shockwave transmits."

Diesel crack spreads hit unprecedented levels, with refining profits exceeding the price of crude itself.

One of the most striking signals in this rally is that US diesel crack spreads have climbed to $110 per barrel—a figure surpassing the price of the underlying crude. This spread measures the profit margin a refiner earns from processing crude into finished fuels, rather than the absolute price of the end product. "That's a considerable margin," Currie noted. These elevated refining profits not only serve as the immediate trigger for Chinese refinery restarts but also vividly illustrate the depth of the supply-demand imbalance in the physical market.

"This is not temporary": a structural inflation narrative takes shape.

Currie pointed out that the latest Brent rally is displaying more durable characteristics, with both equity markets and forward oil curves beginning to price in a sustained supply disruption rather than a short-term shock.

He traces the roots of this inflationary pressure back to years of chronic underinvestment in physical production and transportation capacity, arguing that this structural tension is now evident in both the rates market and the commodities market. "People are realizing this isn't temporary," Currie said. "This time, it has a different feel."

His assessment aligns with his earlier summer warnings about scarcity in physical markets and corroborates HSBC's Paul Bloxham's latest caution that a "super squeeze" has begun. Together, they point to an emerging market consensus: a structural shortage in raw materials may become an unavoidable variable in the future trajectory of inflation.