So Iran asked for 7 days and Trump gave them 10, because (and this is a direct quote from the President of the United States)“they gave me ships.“
Ten tankers. 10 tankers that Iran was selectively permitting through its own blockade at $2 million a pop as a “present.” The leader of the free world extended a war deadline in exchange for a gift basket of oil tankers (out of thousands that have been blocked). We are at a point where American foreign policy is being conducted like a hostage negotiation and, in reality, that’s what this was. The Iranians didn’t release the tankers as a show of good faith but as a show of STRENGTH – to prove to the President that they do indeed control who goes through the Strait of Hormuz (and that it clearly is NOT Donald Trump).
The makes the scoreboard on Trump’s power plant ultimatum:
- Deadline 1 — Monday, TACO’d.
- Deadline 2 — Saturday, TACO’d.
- Deadline 3 — April 6th, counting down.
Trump did not gain a thing in this “negotiation” other than 150 more tankers blocked for the next 10 days – great negotiating Mr. President! 10 more days of Asia running low on physical barrels. The market bought fake peace three times this week and got burned every time. Now it’s just pricing in “this is the new normal,” which is considerably worse than pricing in a potential resolution.
The Nasdaq confirmed correction territory Thursday, down 10.7% from its October closing at 21,408 and down another 150 points (0.6%) this morning. Our “must hold” line in QQQ was 600 and, guess what? It didn’t:
Also, as noted in yesterday’s Wrap-Up Podcast, we have the courts finding Google and META to be responsible for harming children via Social Media addiction. They will appeal it but remember when Google’s motto was “Don’t Be Evil“? Now they are teamed up with Mark Zuckerberg, who is the personification of amorality… On top of that, now Google has announced they have achieved a 6x compression in memory – which is throwing the chip sector under the bus! And now, this morning, Claude Mythos is demonstrating cybersecurity skills (something RJO has long shown off) that is spooking that sector!
The bottom line is S&P has fallen to its lowest level since September and the VIX at 29.77 is telling us that institutional hedges are being put on aggressively (three weeks after we doubled down on ours but better late than never, right?). The “fear gauge” historically signals elevated risk of further downside above 25, and we’re knock, knock knocking on 30’s door. The Oil VIX meanwhile is at 90, compared to 28 a year ago! The energy market is priced for more chaos, not less.
This is what a market in the fourth week of an unresolved war looks like when the diplomacy keeps producing smoke signals instead of signed documents:
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Goldman Sachs raised recession odds to 30%, expects unemployment to hit 4.6% by year-end, and predicts inflation closer to 3% than 2%
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JPMorgan cut its S&P 500 year-end target to 7,200 from 7,500 on March 20 — and that was BEFORE this week’s deterioration
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US, Eurozone, UK and Japan PMIs all deteriorated in March
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The United Airlines CEO is planning for $175 oil and prices above $100 through 2027. When the guy running an airline starts modeling $175 oil as a working scenario, the word “transitory” should be banned from polite conversation!
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With the Strait effectively closed since February 28th (28 days), CNBC’s CFO Council had energy executives warning that April 1st was the cliff edge (something we told you on March 1st). Because, after that, ships that loaded in February have arrived at their destinations and the pipelines begin to run dry. This is just math and physics, folksand we just blew through April 1st with a 10-day extension that gets us to April 6th with ZERO structural progress.
S&P Global’s energy president at CERA Week said the honest part out loud: if the conflict persists and the Strait stays closed, crude could go to $200-250/barrel. That’s not a prediction, it’s a stress scenario, but it’s a stress scenario that was unthinkable five weeks ago and is now being published by a mainstream energy research firm.
Oxford Economics’ model says recession territory requires $140 Brent sustained for two months. We hit $114 intraday already. We’re at $104 this morning. The math is getting uncomfortable – but at least Congress is wisely letting air travel shut down, right?
Buried in the NYT’s reporting on the negotiations was this gem: a senior Trump administration official expressed surprise that Iran insisted on its right to enrich uranium – “a stance it has maintained for decades.” The official, speaking anonymously, also repeatedly confused the IAEA’s acronym, calling it the “I.E.A.E.” and “I.E.A.” — while asserting “I reviewed it. I know enough about nuclear matters to comprehend it.“
This is the person who walked away from Iran’s Geneva proposal in late February – a proposal that Jake Sullivan says “significantly addressed the nuclear issue” – apparently not knowing what the IAEA stands for or that Iran’s enrichment position has been public knowledge since approximately 2002. Nothing but the best in this Administration…
Former Biden NSA, Sullivan, told Jon Stewart this week: “Our negotiators simply did not comprehend the offer, disregarded it, and decided to proceed with strikes.” Trump officials strongly dispute this. The Hormuz is still closed either way.
Despite all the theater, Pakistan’s Foreign Minister confirmed on yesterday that indirect talks are genuinely occurring via “message relay” – Pakistan, Turkey, and Egypt are all carrying water. Iran’s public rejection of the 15-point plan is being described by Islamabad analysts as a “diplomatic maneuver,” not a final answer. An Iranian official met Pakistan’s interior minister in a “secret meeting” yesterday.
Meanwhile Israel (who are not part of any negotiation and have explicitly said so) have announced that they are accelerating strikes over the next 48 hours specifically to hit arms factories before any ceasefire can lock those targets out. So, the country whose military actions would need to stop for any deal to hold is deliberately bombing faster to pre-empt the deal.
That is EXACTLY the kind of nuanced structural impossibility that no amount of Pakistani message-relaying is going to resolve!
We’ve had five trading days of whiplash this week: up on deal hopes, down on deal collapse, up again, down again, and now Friday morning down again with oil back at $104 (Brent). The market has learned that Trump’s Iran announcements have a half-life of roughly six hours, so it’s started discounting them on arrival.
That discounting process, where even real diplomatic news gets sold, is actually more dangerous for equities than the original panic because it means the genuine off-ramp, when it comes, will take longer to be believed. The VIX at 30 is the market saying: we don’t know when this ends, it’s costing real money every day and the people in charge of ending it didn’t know what the IAEA stood for. That’s not irrational fear – That’s arithmetic!
Have a great weekend – assuming nothing blows up between now and Monday, which at this point is a coin flip at best…
