The mood is positive in US markets so far this week as Trump talks about a de-escalation.
The messages are mixed though and that’s leading to some confusion. The oil market remains 1.8% higher but US stock futures are up 0.8% and Treasury yields are down 5-7 bps across the curve.
Trump tweeted about negotiations, much as he did last week, but this time the pop in US stock futures was fleeting.
The United States of America is in serious discussions with A NEW, AND MORE REASONABLE, REGIME to end our Military Operations in Iran. Great progress has been made but, if for any reason a deal is not shortly reached, which it probably will be, and if the Hormuz Strait is not immediately “Open for Business,” we will conclude our lovely “stay” in Iran by blowing up and completely obliterating all of their Electric Generating Plants, Oil Wells and Kharg Island (and possibly all desalinization plants!), which we have purposefully not yet “touched.” This will be in retribution for our many soldiers, and others, that Iran has butchered and killed over the old Regime’s 47 year “Reign of Terror.” Thank you for your attention to this matter. President DONALD J. TRUMP
Since then, we have had messages from both sides trying to clarify and re-frame. Iran’s response seemingly came via Fars News. They noted that Iranian officials say no negotiations have taken place with the US and that none are planned.
They say it’s some kind of messaging indicating that Trump is trying to show that Iran is looking for negotiations for show. The upside of that is that he is trying to show himself as the winner of the war and is looking to end the war.
On the US side, Secretary of State Marco Rubio somewhat contradicted Trump in comments to ABC. Rather than saying different people were speaking, he said the people in Iran are speaking to us in different ways than before. He didn’t offer much else but reiterated that the objectives of the operation were to destroy the Iranian navy and its defensive industrial base and its capability to manufacture missile launchers. He also said — ominously — that the US prefers to settle the war diplomatically but must be prepared for the possibility of diplomacy failing with Iran.
Perhaps telling is that Treasury Secretary Scott Bessent was also rolled out on Fox News and spent most of the interview trying to talk down oil prices. He said the market is ‘well supplied’ despite the missing 10-12 mbps. He also said the US would take control of the Strait of Hormuz over time.
For now, it’s tough to argue with the price action in markets but it’s equally tough to have any conviction in how this will end. Trump is repeatedly talking positively about negotiations but there is almost no verification of that from any other angle and reports were fairly consistent that Iran didn’t even participate in talks in Pakistan.
We are increasingly at the point where one of my favourite memes applies.
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