THE DEEPER DIVE: Inflation Soars on Trump's Hot Air
Iran Big Deal #39 proved as fake as all the previous deal/no-deals today, but stocks loved it, and so did inflation!
The timeframe for Trump fake peace deals to blow up seems to be shortening. On Friday, Iran Deal #39 was announced and destroyed in a single morning. Since the oil war is the primary driver of rapidly intensifying inflation, I’m going to lead off with a summary of the past week’s war action with Iran by OilPrice.com and then we’ll look what happened on Friday morning right after the close of those events and then where it has all finally settled early Saturday morning:
The U.S.-Iran conflict escalated again on Thursday before abruptly swinging back toward diplomacy, producing another day of extreme volatility in both energy and financial markets. The escalation began after two days of renewed exchanges between Washington and Tehran following the downing of a U.S. Army helicopter near Hormuz earlier this week. On Tuesday and Wednesday, U.S. forces retaliated against Iranian targets, while Iran responded in kind. Early on Thursday, Trump threatened to seize Kharg Island, which handles Iran’s crude exports, warning of attacks overnight (in the manner of Venezuela). Those remarks sent oil prices higher until later on Thursday, when Trump reversed course, saying the strikes had been cancelled and a deal was “close”, sending crude in the other direction as the market appeared to simply dismiss Iran’s denial of any agreement in the works. Oil trades on every Trump headline these days. Oil has effectively become a referendum on Trump’s latest social media post.
That is where we were as of Thursday evening. Then, on Friday, Iran suddenly claimed the 49th deal, which it had just denied in the afternoon on Thursday, actually does have an imminent end of war in site that Iran has agreed to, which it said would likely be signed this weekend. So, maybe Trump was right after all. Stocks certainly thought so and began their predictable escalation; but then they are already willing as any John in a brothel to be tricked with any new bullish narrative. Oil prices dropped, and showed the oil market is also riding on every word the Donald speaks. However, bond yields rose as if bond traders weren’t buying the hope that this deal meant the end of oil-scorched inflation was suddenly within sight.
As Iran laid out the terms of the deal, it sounded to me so favorable for Iran, I found it hard to believe Trump would sign it, as he had just boasted was about to happen. Iran claimed it would reopen the strait 30 days after the deal was signed:
Iran’s state-news agency Mehrs published a document in which the U.S. would agree to withdraw its forces from around Iran, lift its naval blockade in 30 days and provide $300 billion in reconstruction money to the Islamic Republic.
Iran would reopen the Strait of Hormuz in 30 days but under arrangements set by Tehran, according to Mehrs. (CNBC)
If there was suddenly light at the end of the tunnel, thirty days more in a tunnel as dark as oil was an awful long way to the light.
This sounded to me like Iran was about to win the war—US agrees to pay for everything it broke, strait doesn’t until after another thirty days economic ruination, and then it opens under Iran’s terms, which, of course, would include heavy tolls and their total control of the strait for all time to come.
Most glaringly, the deal, as Iran described it, said nothing about uranium, except that this agreement was an agreement to work toward an agreement, and it left such other things as the uranium to be negotiated after the initial terms were carried out by the US. It sounded like deal #39 was the same deal that Iran always held out to Trump, not like anything he wanted. Under these terms, Iran could easily get delivery of the initial promises and then still stall forever on the uranium. If that was the 39th deal Trump had announced to turn the market around yesterday, he would have to be awfully desperate to sign such a thing, but he did get another great TACO trade out of the stock market for his family and friends if he did decide to chicken out.
Then this happened right after the news from Iran shifted the markets:
Trump’s tone shifted Friday after Iranian state media released a document described as a draft deal. The U.S. president denied the Iranian text represented what Washington and Tehran had agreed in writing.
And that has always been the snafu: both sides have completely different understandings of what the vague TALK of a deal means and always seem to have no written draft of any kind of preliminary mutual agreement. So, they say what they want to say. That, or Iran just denies there was any walk toward a deal at all.
President Donald Trump on Friday insisted that the terms of a war-ending deal that have been circulating in Iranian state media “have NOTHING to do with the terms that were agreed to, in writing.”
Probably only in Trump’s writing with no Iranian signature, as he has never in all of these deals produced anything in writing for the pubic to see that Iran had actually signed onto the deal he claims they agreed to in writing.
Iran’s Mehr News Agency had reported that a draft deal includes a commitment from the U.S. to lift oil sanctions and that final negotiations will not begin until half of Iran’s frozen funds are released and a U.S. naval blockade ends. The deal also includes a pledge from Iran to reopen the Strait of Hormuz within 30 days, among other points, Mehr reported.
“What they said, including their weak and pathetic statement on having a deal, bears no relation to the truth,” Trump said in an angry Truth Social post Friday morning, slamming the Iranians as “very dishonorable people to deal with.”
“With them, there is no such thing as dealing in good faith,” Trump wrote.
“They better get their act together, and FAST!” the president wrote of Iran. (CNBC)
Well, that was certainly a case of the toad calling the snake ugly. Suddenly, this morning’s early flash of a deal before our eyes was off, and headlines that had claimed it was about to be signed vanished or got revised to speak more of Trump’s denial of any kind of deal like the one Iran had just described. So, deal-on/deal-off in the same morning on Friday, closing the week just like it had gone everyday but with even faster speed. It has always been stunning how quickly Trump deals fall apart, even back in the tariff days when he tore them up himself; but this was a new speed record.
Trump had claimed in the Oval Office on Thursday that the U.S. “just made a great settlement of the war with Iran,” subject to the “finalization of documents.”
For me, Trump’s first announcement of Deal/No-Deal #39 was the point at which I said to myself, “Yeah, sure.”
Apparently, Trump was, again, operating off a page that the US had put together that looked great for the US, and Iran was operating off a page it had put together that looked great for Iran, and each was tricking itself into believing its memo was the one the other was accepting. They are obviously on completely different pages.
Even Zero Hedge, which has almost never criticized Trump until very recently, lest it offend its core audience, has apparently had enough of his lies at last and published the following article on Friday:
Fool Me Once? Shame On You. Fool Me 39 Times...?
After several days of strikes against Iran, and several morning announcements that strikes were set to continue, Trump announced via Truth Social that the “scheduled strikes and bombings against Iran” have been cancelled as a peace deal has been agreed upon. Indeed, “discussions and final points have been, in both concept and great detail, approved by all parties involved…
According to our recently published energy strategy report, 103 Days, 38 Peace Deals, yesterday’s announcement would constitute the 39th peace deal declared since the onset of the war….
It should be noted that the provided list of “all parties involved” does not include one party who some would argue is pretty heavily involved…Iran. Perhaps Iran was counted in the “and others” part of the list, but this wouldn’t be the first time the US proposed a deal it thinks Iran can’t refuse, just for Iran to either outright refuse it, or announce that it never received such a peace deal in the first place.
That’s the same thing I had written about Trump’s announcement.
It should also be noted that some of the “involved parties” who were listed, like Israel and Pakistan, have confirmed that they had not been informed of any agreement at the time the peace deal was initially announced.
The market’s reaction to the deal coupled with the major IPO events today may add further credence to our view that defense-related rhetoric these days has just as much to do with financial markets as they do with geopolitics.
I couldn’t have said it better myself, except that I’d add “and particularly with profiteering off of insider knowledge about the deal’s announcement schedule,” which may be what they were implying, but I’d just state it outright as an obvious likelihood, since big, highly profitable trades keep happening right before the announcements.
And, finally, we got this, as yet, unverified report of where fake deal #39 has ended up early this morning:
Stocks, which had soared to over 500 points on the Dow settled quickly back on Friday to about half of the morning’s manipulated rise from the unexpected deal/no-deal because, once again, the war, which is now moving into its fourth month, continues indefinitely. Most likely what is holding the market up that much is the enthusiasm generated from SpaceX’s big IPO debut on Friday. That was bound to be an adrenaline rush, though even SpaceX settled down halfway from its maximum rise after its initial opening. That still left Elon Musk as the world’s first trillionaire. Musk is hoping to raise money to put AI data centers in space, so that should be lovely. The skies will be forever filled with giant floating lights. Maybe they’ll even sport huge flashing billboards or corporate logos for all to see.
With the state of the peace negotiations established as farcical once again, I want to turn to a real discussion about what is happening and will be happening right now with rapidly rising inflation because the die for that has already been cast for this summer. We’ll look at how hot the two latest inflation reports this week got and how much of the new inflation happened outside of the direct rise in energy prices, since a rise in energy prices was easily certain; then we’ll look at what inflation measures show the rise is going to become substantially worse over the summer and why. That is with oil prices as they have been.
Then we’ll close by looking at what oil industry leaders said this week is coming in oil prices, which will raise all of that up to a higher plane, since the cost of energy is the main driver in the rest of the rising inflation, though tariff-caused inflation is intertwined in a way that cannot easily be separated out anymore.
