Markets:
You can’t shake the feeling that there will be at least one more twist in this saga but all signs were positive on Friday as Iran announced the Strait was reopening and Trump said a deal is coming in a day or two. That led to a $10 drop in oil prices and the corresponding price action with bond yields down 6-8 bps late and the Nasdaq up for a 13th straight session.
The US dollar sold off and the euro rose as high as 1.1847.
Notably though, the US dollar decline didn’t last and completely reversed later. The moves in stocks and bonds moderated. That could be a sign of creeping doubt, profit taking on the ‘peace trade’ or something else. Very late in the day there was a report about ships being turned away in Hormuz and some doubts about Trump’s claims, including Iran’s uranium leaving the country. There were also an incredible amount of leaks, so many that it seemed more like a communication strategy than anything genuine.
The fear is that Iran’s negotiators might not be on the same page as the IRGC and that Trump’s over the top enthusiasm today was to find out if those negotiators even have the power to dictate a deal to a reluctant IRGC. There was also a report that Israel’s Netanyahu was shocked by the claim that bombing on Lebanon will stop.
Could this whole thing be an effort to suss out if there’s division in Iran? Or is that just paranoia after several recent weekend where Trump and JD Vance delivered big surprises? It’s hard to shake the sense there will be at least one more twist in this and that the risk-reward is now badly tilted towards disappointment. At the same time, would Trump do all this talking only to pivot immediately back to attacks?
Time will tell but the latest WSJ leak said an in person meeting was tentatively scheduled for Monday so that will be something to watch for but the main thing will be if ships actually keep moving through Hormuz, as some already have.
