WAR ON TWO FRONTS Explodes Oil Prices, Causes Stock-Market Priesthood to Declare they Were Shortsighted
All the things they are now saying they were shortsighted about were reported here months back as facts EVERYONE should be paying attention to because they would become the facts that count.
The NASDAQ plummeted like a missile, falling more than 2% today, and the Dow dropped 500 points. Even the point fall of the smaller NASDAQ was greater than the Dow. And the reason was the war, which has roared back into life and spread wider with the Houthis opening a second front by taking control of the Red Sea. As a result, oil prices soared upward to take Brent Crude over $101/bbl at one point of the day, finally settling at just over $100.
The funny part came in hearing mainstream financial media finally concede that the market has been “shortsighted” about the war. I guess they should read here to get a better sense of things.
Shortsighted stock market can no longer brush off war: ‘It’s too hard to ignore $100 oil’
You have to wonder how all of them failed to see that coming. Yet, they did, and they are now calling themselves shortsighted after the twelfth night of war finally blasted some reality into their heads.
While the U.S. has conducted strikes against Iran 12 nights in a row — sending both oil prices and Treasury yields higher — domestic equities had mostly brushed off the idea of the war between the two countries heating up again, staying flat while oil jumped.
Finally, they got enough doses of reality to wake up for … well, at least a day.
That changed on Thursday, though, when Brent Crude futures jumped above $100 per barrel and the 10-year Treasury yield broke through 4.7%, hitting its highest level since January 2025, after reports of attacks against tankers off the coast of Saudi Arabia.
Who knows what kind of poppy paradise these marketeers be smoking in tomorrow as greed grasps for another reason to raise stock prices. However, even CNBC’s Crazy Cramer now says he’s finding it very hard to find a reason to buy stocks while he finds abundant reasons to sell them.
The people making the money today are the ones shorting stocks, and the ones who are making the most are the ones who are shorting the stocks that rose the most—the ones the “shortsighted stock market” once said couldn’t fall. Even the market’s priesthood at CNBC is calling the market “shortsighted” at this point.
Now, had they all been this kind of “short” sighted, they’d be making bank:
Short sellers notch $15.5 billion profit as SpaceX shares slide.
Yes, the world’s biggest IPO is flushing badly as people short the AI narrative. Elon Musk, of course, said today that the growing numbers who are betting against SpaceX are going to be sorry … someday. The funny part is they are not cashing in their huge profits. They are extending their shorts to take the ride even further.
“There is no sign of short sellers taking profits on SpaceX,” Ortex co-founder Peter Hillerberg said.
“If anything they are leaning in harder,” Hillerberg said.
So, one of the biggest of the big boys is falling harder as market vigilantes seize control like a bunch of Houthis, creating a sea of red on the market marquis. That’s made rougher by the fact that 56% of the stocks purchased from SpaceX during its IPO were bought with loans.
“These problems became too big to ignore,” said Steve Sosnick, chief strategist at Interactive Brokers, about the move in stocks on Thursday. “It’s too hard to ignore $100 oil. It’s too hard to ignore 10-year rates that are above 4.70%. It’s too hard for the stock market to ignore 30-year rates that are solidly above 5%.”
And who could have seen any of that coming?
“The survival probability of firms who maintain a significant short position in SpaceX over time is very low,” SpaceX CEO Elon Musk wrote in a post on X on Friday.
As Zero Hedge’s motto says, “On a long enough timeline, the survival rate for everyone drops to zero.”
So, yes, eventually those betting against SpaceX may not survive if they hold out too long, but it looks like they still have a good ways to run. So, take it away, Boys (and Girls)!
The weakness in SpaceX shares reflects in part investor concern over debt-funded AI spending. Tesla, another Musk company, reported negative free cash flow in the second quarter for the first time in more than two years as the EV maker accelerated spending on AI infrastructure, battery capacity, robotaxis and next-generation manufacturing.
Yeah, all these guys need to stop that. Their problem is that, when you quit feeding any Ponzi scheme, that’s when it falls. So, they can’t quit.
Meanwhile, it’s getting easy to walk the shores of the Red Sea at night without a flashlight, as the region is lit with the flames of oil tankers.
Of course, “Stupid is as stupid does,” and some sure does remain stupid:
“We have consistently argued since 2nd half of March to use the equity weakness brought on by the Iran conflict to buy into, as the off-ramp and the eventual deal were likely, in our view,” wrote JPMorgan equity strategists in a note earlier this month. “The risks of renewed flareups remain, but we believe one should keep using any dips on the back of adverse geopolitical headlines in order to add.”
Well, I say, “Tank up, JP. I never liked you anyway.”
You can never avoid stupid entirely. It’s not in short supply like oil is. Never short stupidity.
Back in March, many analysts were surprised that the stock market didn’t react more to the conflict initially, and concluded that the U.S. economy was in better shape than in the past to handle energy shocks. That’s a bet that Michael Tanney, CEO at investment advisory firm Pereon Wealth, is taking again.
See? There is always an abundance of stupid. Still, it’s nice to see that a good part of the priesthood now has turned to confessing that the market they were advocating was shortsighted.
Later Thursday, Axios reported that Trump said he’s “considering a massive attack” on Iran. He told the news outlet that it would be “bigger than ever before,” before adding, “I am close to making a decision. We are all set for it.” The president did not give a deadline for the decision, however.
I wouldn’t go long on anything Trump says either, because he flip flops and TACOs from one day to the next. Still, I think betting on the war running longer and oil troubles going deeper is the safer bet. While Trump badly wants out and hopes that his threats will press Iran to negotiate, they never have so far. Iran has stayed rock-solid on the terms it expects, and is willing to run the clock out with fake negotiations that are constantly frustrating Trump. With the Houthis now fully involved in creating a second warfront, Iran knows the pain factor is rising quickly for the US. So, no, they are not jumping to make a deal as President Chump repeated again today.
America pays heavy price
As a result, the cost of America’s national debt is skyrocketing, too, with the Treasury market now putting out red alerts on a weekly, if not daily, basis. The world’s biggest bond market sent out its second red alert this week. You can read all about that in the headlines below and what it means for the “economy [that] was in better shape than in the past to handle energy shocks,” as Tanney claimed above. How long will it be in supposed better shape when fuel prices are soaring again, and we haven’t even gotten to the part yet where we see fuel shortages at gas stations sending prices to the moon.
You can also get a sense via a thorough video posted below of how the Red Sea, as the new war front, is now living up to its name under the evening glow of oil tankers going down under multiple missile strikes per tanker. The video also explains why expanding the war to two fronts means some tough testing of the US military.
Winning one war is difficult enough. Fighting two at the same time could become one of the greatest strategic tests the Pentagon has faced in years.
Another video describes the message Trump sent to Netanyahu to prepare for a huge planned expansion of attacks by the US as major evacuation orders have been put out to embassies in the Middle East.
Also, a major gold announcement.
