There is no sense over-analyzing price action today across markets. Yes, there is the usual software anxiety in stock markets but the overarching theme across bonds, FX, commodities and precious metals is simple — angst about US strikes on Iran.

That thinking has US 10-year yields below 4% for the first time since November while oil prices are up more than 2%. It’s also lent a bid to precious metals and the US dollar, though (unsurprisingly) the loonie and Swiss franc are top performers.

Now, no one really knows what will happen in the Middle East. Clearly, Trump is at least trying to put maximum pressure on negotiations via a massive US military build up in the region. Yesterday, various reports said negotiations were positive but we didn’t hear that from the only person who matters: Trump.

At the same time, what people are saying matters much less than what they’re doing and the US has evacuated bases near Iran while moving massive amounts of steel to the region.

I would highlight a pair of news items in the past hour or so, both of which have trimmed oil’s gain:

1) US Secretary of State Marco Rubio announced a March 2-3 trip to Tel Aviv.

Would he be doing that at the same time bombs were falling? I tend to think not and others might argue that the announcement of the trip is meant as a diversion to get Iran to lower its guard.

2) JD Vance spoke to ABC and said any actions would be limited.

“The idea that we’re going to be in a Middle Eastern war for years with
no end in sight — there is no chance that will happen,” Vance told the
Post. He described the range of options as strikes that would “ensure
Iran isn’t going to get a nuclear weapon” or actions that could lead to a
diplomatic solution.

The nuclear bit is particularly notable as there is nothing there about regime change or about crippling Iran’s oil exports. Yes, Iran could be forced to shut in via circumstances and could try to shut the Strait of Hormuz but I don’t think they will take that course of action if they don’t sense a US effort to topple the regime.

All that said, Trump is about the least-predictable person in history so this could go in any direction. I don’t fault those buying bonds in this environment but the long history of Middle East strikes and wars arguing for selling oil as the dust settles.