Trump tried to calm down the markets and the situation in Iran by extending his ‘deadline’ to attack Iran’s energy infrastructure by 10 days until April 6.
That led to a quick jump in US stock futures and a drop in oil futures but it’s since reversed. WTI crude is now up $2.57 to $97.07 while S&P 500 futures are down 32 points.
While the initial reaction was upbeat that Trump was saying negotiations were going well, the market appears to be concluding that there will be no oil flowing for another 10 days (and around 110 million barrels) and that Trump might not be telling the truth on negotiations.
Today, the Iran Revolutionary Guard also clarified its stance on friendly vs unfriendly passage of the Strait of Hormuz to say:
Any vessel traveling “to or from” ports belonging to allies and supporters of the Zionist–American adversaries is prohibited from transit, regardless of destination or route.
The port detail is critical because there was a scenario where oil could travel through the Strait to those friendly countries like China and India and essentially reorient supply while narrowing the daily gap to only 2-3 million barrels. The IRGC appears to be getting ready for a war with other Gulf countries, including the UAE and Saudi Arabia.
There is also the weekend risk that’s creeping into the market. Trump hasn’t exactly been truthful during negotiations and likes to launch operations on the weekend. The US has been gathering soldiers in the region and we could see an attack on Kharg Island or some other part of Iran after the close today or Saturday morning. Whether that escalates the war or cripples Iran is yet to be seen.
In terms of markets, one spot to watch is USD/JPY as that pair flirts with 160.00. That’s a level that’s invited intervention in the past, something that could roil broader markets.
