According to MarketWatch, a collective lightbulb may be dimly brightening over the stock and oil futures markets. And it appears this brightening is NOT about faith in Trump’s latest TACO on bombing Iranian power plants. Trump TACO’d again by extending the deadline for Iran to open the Strait of Hormuz to April 6th or else. Supposedly, some people in stock and oil futures markets are wondering if Trump will really wriggle out of this clusterfuck he created.
IMHO both markets are filled with block heads.
US oil prices turn higher for the week as Trump’s 10-day pause fails to calm Iran war concerns
As of my writing, oil prices in the futures market are back up to where it was before Trump TACO’d on Monday (now at $100/barrel).
But this is how one oil analyst put the latest news:
The 10-day extension is “time bought, not risk reduced, and markets are pricing that distinction,” said Stephen Innes, managing partner at SPI Asset Management.
‘The barrel does not care about messaging — it cares about flow. And right now, flow risk is rising, not falling.’ — Stephen Innes, SPI Asset Management
“The barrel does not care about messaging — it cares about flow,” he said in Friday commentary. “And right now, flow risk is rising, not falling.”
The Iranian regime, the people who get a vote in this war, are saying that the Strait will remain closed. They also claim that there are no direct negotiations with the U.S. Additionally, they have made some “maximalist” demands of their own for the Strait to open again.
The markets expected Trump to do one of his many magic tricks that allow him to avoid accountability (i.e., someone else bails Trump out or blocks his going to prison). However, the Iranians are not going to let Trump off the hook. And time is on their side.
Speaking of time, some oil analysts are starting to make predictions of how bad oil prices will go if the Strait stays closed.
Oil prices could hit $200 per barrel if the war in Iran persists through the end of June, according to strategists from Macquarie Group.
If the war were to stretch well into summer, the strategists wrote in a client note on Wednesday, prices would need to move high enough to “destroy an historically large amount of global oil demand,” likely requiring Brent crude prices above $200 per barrel and pushing US gasoline prices up to roughly $7 per gallon.
Think about that. Now, I know folks in CA are paying up to $6 per gallon now. The average American gas price is about $3.79 per gallon. But I cannot imagine what it would be like if the dear old Bluegrass State where I live had gasoline at $7 per gallon.
The Iranian regime knows this. These are the same folks who held American hostages for 444 days. I’m reasonable sure the Iranian regime could block the Strait for a few more months.
The only people I can think of that believe Trump can avoid this scenario are 1) MAGA, 2) the legacy media and 3) the stock and oil futures markets, at least for now.
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