Quick Thoughts on Current Market Dynamics
Some on the fly thoughts on the current market dynamics going into Monday. Much of this was typed last night but I am keeping it to exemplify the fluidity of the situation…
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Last week we got an announced cease fire that isn’t really a cease fire between all parties and requires the strait to be open but it’s pretty much not open. Traffic is actually slowing down according to some reports.
But nonetheless, markets were up on the news for the most part last week. Why?
The reality is market was pricing in US seeking a deal, and oil traffic starting to return whether via tolls or not. It seems the US has shown it wants out essentially... and Iran is willing to let traffic go through - with a toll. There is a fair perception that Trump may just say "ok not our problem" and leave.
In that scenario, companies/countries will either pay or an international coalition will need to step up and it seems there is no appetite.. so honestly it seemed like Iran was going to make out with some control over the strait, as terrible as a strategic end to the conflict that that is.
And... the odd dynamic of the US economy right now is that, technically speaking, the US GDP benefits from higher oil prices as it is a net exporter. This attitude is clearly also in the mind of the US admin, with recent comments about the quality and quantity of US oil.. basically “buy from us.”
That doesn’t mean it will be good for consumers, business, or the global economy…
Iran is actively attacking its neighbors and none of them are retaliating, the idea that they will do anything to prevent an Iranian tollbooth if the US leaves is highly unlikely…
