Trump's Israel-Iran Schmeasefire Blows Apart

Jun 08, 2026

Hal Turner composed an excellent hour-by-hour, even minute-by-minute, updated synopsis of how the schmeasefire started blowing up over the past day. I’ve posted it at the top of the war section for anyone who wants a good review of how it all fell apart between yesterday evening and this morning.

Trump predictably said the deal is still coming together because Iran really wants to make a deal, but it looks like it is hanging by the thinnest of threads because, while Iran said it has done all the bombing and missile strikes against Israel it intends to do at this point, it also said it will do a lot more for a full seven days if Israel retaliates. Israel stated outright that the war is not over because it fully intends to retaliate forcefully.

Trump said Israel and Iran “are looking to do an immediate ceasefire” and that negotiations were proceeding despite the attacks. Trump earlier ordered that Iran and Israel “must immediately stop” attacking.

The news caused the 30YR US Treasury to break above 5% and finally hold there all day. While this is danger territory for stocks, the stock market appeared to decide, again, to listen to Trump. Chipmaker stocks rebounded some from their previous routes, but the AI crash contagion sped to South Korea where the market was halted on “circuit breakers” after taking an 8% cliff dive. The Dow traded flat, but the NASDAQ closed up less than 1%, not a lot compared to its recent dive.

“This continues to be a market that is evaluating the catalysts and the potential risks and placing them on a scale,” said William Northey, investment director at U.S. Bank Asset Management. “The solid fundamentals that exist here in the U.S. – based on consumer strength, capital expenditures, the corporate earnings cycle – have been outweighing in large part the risks associated with the Middle East conflict.”
However, the longer the conflict exists, the “more potentially damaging it can be to fundamental economic activity [due] to the creation of inflation pressures that are beyond transitory,” he added.

Oil schmoil

Oil markets also foolishly ignored the resurgence of war. Prices bolted up, but then faithfully settled back down as soon as Trump assured investors his schmeasefire talks were proceeding nicely. (Talk about intentionally gullible markets.) Or maybe it was as soon as Iran said it was done … for now … with attacks, the two events being close in timing. (Likewise, perhaps, for the settling down of stocks.)

Both markets—oil and stocks—are beyond foolish to be ignoring the realities of this war. Analysis reported today says that, if the war ended today, the quickest the Strait of Hormuz could get back to “normal” would be January of 2027. Even Donald Trump said it would not be likely to open at all until the end of summer. While oil prices settled down as soon as Iran said it was done (for now), the foolishness of that bet became immediately apparent (or should have) when Israel said it’s not over. So, oil speculators seem to be betting just on any positive facts of the given moment and discounting any negative predictions. They may be deliberately rolling big on the bets with the worst odds but biggest potential payoffs, but they’d do a lot better to cast those bets on a roulette wheel in a casino somewhere.

Three articles today talk about why the approach of tank bottoms are a problem even though the US has lots of crude and refineries are running about as close to full capacity as they get. The biggest problem is the rate at which inventory is falling. Tanks were full to a surplus before the war, so that surplus against normal needs has kept problems from emerging, but we are now well below the surplus.

Finished Gasoline inventory is still fairly good, but inventories have been falling much more quickly than usual, and we haven’t even hit the summer driving season. The main reason for the unusual rate of decline is not the lack of refining velocity, but the amount of gasoline that is being sucked out of the nation’s inventory by high European demand, pushing prices up for US consumers. As Europeans and others quickly get to their own tank bottoms for stored gasoline, their demand for US gasoline will intensify, and American buyers will have to compete against that demand. So, things could tip quickly.

A certain relatively high level of crude oil inventory works as a buffer in pricing, but typically when the market gets below that “lower high," let’s call it, market buyers become more jumpy, prices become more volatile. Production may experience some interruptions. Levels are now particularly low at one of the nation’s most important storage facilities:

‘You have a buffer getting close to not being a buffer anymore,’ analyst says
An aerial-drone view of a crude-oil storage facility in Cushing, Okla. Crude inventories are at their lowest levels in years in the U.S. amid a war with Iran that’s dragged on for months….
There are growing worries that U.S. commercial oil inventories are too low for comfort as the war with Iran enters its fourth month far from a clear resolution - and a lot hinges on how much longer the conflict drags on.
Inventories are the shock absorbers of the energy world: They smooth out the tension between the ups and downs of supply and the usually steady pace of demand. To be an efficient cushion for countries and companies, however, stockpiles need to be at “Goldilocks” levels: not too much, not too little.

Also, some fuels like diesel and jet fuel are dependent on distillates in the mix that come largely from the Middle East because they are more easily refined from the oil over there and because US facilities do not handle that kind of oil refining as well.

One article in The Daily Doom headlines today makes the point that the US is good through the summer, but two others stress the rate of depletion and the lack of special distillates as likely to cause production problems by the end of June. That will make buyers jumpier.

One article especially points out the folly in the way people are looking at the total amount of oil in stock, pointing out that most of that oil in stock is not accessible. As much as 10-20%, depending on the tank, is junk oil that has built up at the bottom of the tanks—sludge—that cannot be pumped. The tanks have to be cleaned to get the sludge out, and the sludge requires special processing to get valuable products out of it, which still doesn’t yield much fuel.

Another large percentage of oil is in transit from other areas. When the US talks total inventories, it is also talking loads paid for that are moving across the water. Then there is the huge amount that sits in pipes and needs to always be in pipes to keep them flowing. You don’t really want to try to drain the thousands of miles of pipelines dry unless you’re extremely desparate or its necessary in spots for repairs, and all of that is included in total oil inventory.

In fact, a recent analysis suggests that the world oil system will start to experience “operational stress” sometime in June. Operational stress “is the point at which the system begins to experience significant functional strain: price volatility becomes extreme, rationing of refined products begins in the most exposed markets, and the margin for error in supply chain management drops to near zero.” This analysis takes into account ongoing strategic petroleum reserve releases around the globe and states that “[e]ven full deployment of strategic reserves buys weeks, not months, at current drawdown rates….”
To understand why the world economy is about to hit a wall with regard to oil supplies, you need to understand exactly what “operational minimum” means. While there appear to be many billions of barrels of oil inventories left as of now, most of those barrels are what is known as “system fill.” They fill pipelines, refineries, oil tankers, rail tank cars, and tanker trucks. It is not feasible to operate a pipeline without any product moving through it. It is not feasible to operate refineries without any feedstock in them. It is impossible to operate a seaborne or land fleet of tankers without having some of that fleet actually carrying oil and/or oil products to their destination, products which are unavailable for use while in transit.
The absolute operational minimum floor for the global oil system is estimated to be about 6.8 billion barrels. Below that, the system will simply not function. On our current trajectory, the world will reach that point in September, if not before. It turns out there really weren’t 8.5 billion barrels of available oil inventories across the world at the beginning of the war, only 8.5 billion minus 6.8 billion, or 1.7 billion. Big difference!

However, the picture gets worse, and hence the shorter timeframe to troubles given by some:

The moment we reach “tank bottoms” actually comes before we reach operational minimum. Technically, “tank bottoms” refers to the sludge that builds up on the bottoms of storage tanks, which must be periodically cleaned out and disposed of or processed to extract valuable products. In this context, this moment is when practical commercial storage runs very low, so as not to be a reliable buffer between current supply and demand. That’s when a bidding war will begin, and oil prices are likely to spike to $150 a barrel or higher, oil industry executives say. That moment is not far away, even as the world sleepwalks through the greatest oil crisis in history.

Once some tanks start getting down to sludge, panic sets in, and bidding wars start. It’s not that we have hit a level where we cannot produce. There may still be enough oil to keep producing until the end of summer; but the problem is that operations become more erratic and less efficient, so buyers become more jumpy, which means prices become even more erratic and jumpy.

An agreement to end the Iran war within the next few days would not change the outcome because it would take at least three months to normalize traffic through the Strait of Hormuz under the absolute best of circumstances. And, I don’t think we’ll see anything like the absolute best of circumstances arise anytime soon or probably ever again.

And, as if that is not bad enough, reports are coming in today that the flash point that I said last week could hit very hard, just did. Two reports I came across said Yemen has shut down access to the Red Sea and the Suez Canal. I haven’t seen anything from mainstream news sources on that yet. If it proves to be true, it will more than double the coming inflation pain by hitting more oil, but mostly by now bringing a major freight route to a close.

More fake peace talks

The idea that the war will end soon won’t solve the oil problem even if Trump is not just lying as usual, which it, once again, appears he is:

President Donald Trump said in a Truth Social post earlier Monday that, despite the latest outbreak of violence, both Israel and Iran “are looking to do an immediate CEASEFIRE!”
“Final negotiations on ‘Peace’ are proceeding, subject to ignorance or stupidity getting in its way,” Trump wrote. He added that an ongoing U.S. blockade of Iranian ports in the Gulf of Oman will not be lifted “until a ‘Final Deal’ is reached.”
“Things should move quickly,” Trump claimed as the war, which he initially said would last four to six weeks, crossed the 100-day mark on Sunday.

Exact same pattern as all other times. Trump says Iran is dying to make a deal. Iran says it is not and then proves it by launching some more attacks. It seems ignorance and stupidity are getting in the way all the time.

However, an Iranian official earlier Sunday appeared to cast doubt that any agreement with the U.S. was forthcoming, telling MS NOW, “a deal with President Trump is no longer feasible at this stage.”

Iran has stated several times that it has no willingness to negotiate with someone who lies all the time. Today’s action certainly shows they are not too concerned about scrambling to make a deal.

Miscellaneous mashup

Two other interesting side notes came through today on things I wrote earlier today and earlier last week. One is a story about how much support inside of Russia for Putin is falling apart and how more people are feeling emboldened to criticize the war he is stuck in, even calling it a “war” now, even though doing so can bring swift punishment. Most of the article is behind a paywall now, but earlier in the day I read it all. It was a pretty thorough take down about how Putin’s popularity is bleeding.

(See my earlier editorial today: “Trump’s Iranium Quagmire.”)

The other article was about AI by one of the biggest investors in AI, who says he has become convinced that many of the top people in AI really are driven by a zeal to create a digital god to rule over humanity.

Venture capitalist Bill Gurley, one of the technology industry’s most influential investors, says he has developed a disturbing theory after spending weeks studying Anthropic, one of the world’s leading artificial intelligence companies.
According to Gurley, the threat may go far beyond concerns that major AI firms are seeking regulations to eliminate competition.
Instead, he fears some of the industry’s most powerful figures genuinely believe they are creating something akin to a digital deity….
“The more I dig, I’ve met people who I dare say think it’s their responsibility and they’re excited about building a species that’s superior to humans,” Gurley said during a recent episode of the “All-In Podcast.”
“I don’t think they think they’re writing software.
“I think they’re midwifing a deity here.”

(See my earlier Deeper Dive: “THE DEEPER DIVE: Racing Toward Dystopia, Part One.”)

He says that all their talk about the need for regulations to slow down development to a safer speed are nothing more than an attempt to use regulations to slow down their competition in order to not let competition widen beyond the current leaders. Typical story when it comes to regulation.

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