The world's oil traders pushed the price of a barrel of Brent crude under $80 yesterday.
By doing so, they are saying that I am wrong.
They are saying that the war in the Gulf is over.
They are saying that oil supplies are going to return to normal.
They are saying that there will be no oil crisis.
They are saying that the disruptions to trade, food supplies, commodity supplies, and the threat to business and economic stability will pass.
As a result, they should also expect that the threat of rising interest rates will pass as well.
And they are saying that because they believe Donald Trump, and even more, they trust Benjamin Netanyahu.
They think Trump will keep his word.
They think he can control Netanyahu.
They think neither of them will provoke Iran again.
But they have believed that before, and they were wrong.
I did not believe them when they thought that before now, and I was right.
I wish I could share their optimism now, but I don't.
As Trump has done before, he has engineered some stability for the moment, for the sake of his birthday celebration, for the sake of the G7 Summit, and for the sake of appearing to be a man in charge of his destiny. But appearing to be in charge of his destiny, and actually being so, are very different things.
I may be wrong. The world's markets may be right. But really? Are they that naïve? I think they might be, but for once I would like to be persuaded otherwise, more in hope than expectation.
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But……….
The new ‘Norm’ is that Iran & Oman are now deemed to control passage through the Straits of Hormuz
Um, interesting
Trump has alienated most of the traditional allies of the US, one way or another. Some smile and flatter, and pretend not to notice the insult, which he seems to see as weakness. Others push back more strongly. It is not clear that either makes much difference. The midterms are coming and then two more years.
Is it going to be very interesting to see if Trump will turn on Israel if Netanyahu continues to defy Trump’s wish for peace by bombing Lebanon and provoking Iran to respond in kind.
The US/Iran memorandum of understanding is what lawyers would call an agreement to agree. Perhaps that is as good as a treaty with Trump – you could never trust him to keep his word anyway – but it is a very shaky foundation for a lasting peace.
Meanwhile some oil may start to flow from the Gulf (and fertiliser, and helium, and all the other important materials whose supply chains have been interrupted) but the disruption will not go away overnight.
A lot to agree with
The wording of the “agreement” between the US and Iran has not been published. Yet the markets make dangerous assumptions that “normal service” through the Gulf will resume very quickly.
As Aurelian observes about the supposed ” agreement ” there is no deal here and the Iranians can close the Straits any time they like”.
The wild cards are Trump and Israel. How long before they start bombing again, trying to force Iran to bend the knee to them?
The world economy remains very fragile.
Much to agree with
I find political analysis very difficult nowadays, when the majority of the key players and pundits on the world stage are either very dishonest, or very dim, or quite frankly, diabolical.
What they SAY, is almost irrelevant – why would I be interested in what Trump or Starmer or Netanyahu or the press SAY?
I know their history, their unreliability, their disregard of basic morality, their capacity for almost total self-delusion.
I know that their actions are almost NEVER aimed at making the world a better place.
So I have to assume the worst. Expect incompetent deceit and lies. Assume that they will act out of (personal) self-interest, fear, delusion, arrogance, prejudice, bias, ignorance, or even hedonistic self-indulgence.
I find that very bad for my moral, spiritual, emotional, mental and eventually, physical health. So I have to fight another battle, a personal one, that says, NO! You are NOT having my soul. You are NOT going to corrupt my anthropology of hope. Most people are NOT like that.
It’s an uphill battle. Some vulnerable people get broken by it, and I won’t judge them. But those of us who can, HAVE to keep kicking upwards towards the light.
“The light keeps shining
in the dark,
and darkness has never
put it out.”
https://www.biblegateway.com/passage/?search=john%201.5&version=CEV
KUTGW!
All there is, at the moment, is a memorandum of understanding. Nothing more. As we lawyers put it, it’s just an agreement over the heads of terms and not a binding agreement. Unless and until the final peace deal is concluded, nothing is certain. Israel, however, appears to be doing whatever it can to sabotage the process. Over the decades when I was in practice I have always paid heed to the adage that there’s many a slip twixt cup and lip. I fear the markets are being driven, once again, by herd mentality (as also seen in the AI hype) and unrealistic wishful thinking.
Much to agree with.
I thought that various needed facilities for oil/fertilizer etc in the Gulf had been destroyed or severely damaged, to the extent that repair times were in years. Earlier predictions didn’t give the impression that “normal service” would be resumed any time soon. So surely the markets are over-optimistic?
But then, if the price isn’t changing, they seem to see this as an unwanted state, as to make money prices must change. I guess it really doesn’t matter, someone makes money and someone else looses, it seems to be turn and turn-about. The consumer is always there to buy the product, effectively funding their speculations.
Is this market system really the best? We’re seeing a lot of the down-sides at the moment. I just feel that mother-earth is reaching the limits in its ability to supply the human animal’s wants.
You are right – presuming there is peace there might be a reopening – but then the question is, what is there to flow through it, and will ships take the risk of the passage?
How convenient that the price has gone down so that someone can make a pile of $ when the price goes back up after Bibi drops his next bombs on Lebanon and everyone realises that the trickle of tankers getting out of the Gulf haven’t solved the underlying problems.
Agreed
Iran gets a favourable deal, and Trump seems willing to try to give up on most of his demands and pretend he’s not lost hundreds of billions to get a worse deal than the one he threw away, and that paying reparations is not an indication losing. That capitulation makes peace more likely. Israel and Netenyahu could easily wreck things. However, Netenyahu was only able to proceed with some measure of support from the US, and on that Trump seems to have turned (at least for now).
I wouldn’t place good money on there being lasting peace, and it is clearly not a full peace deal yet, but there are reasons for cautious optimism that it may be the foundation.
It’s not a win for Trump. It’s just stopping digging an ever deeper hole. It’s unequivocally a loss, but he’ll try to spin it otherwise (as the ‘great deal-maker’).
The question is what Trump will do next. He’ll be hurting over things not working out – including his name being taken off a building and the reflecting pool filling with algae immediately. He’ll be looking for replacement wins. Renaming something else seems likely, perhaps we’ll see a ‘Trump Board of Peace’ shortly? On the war side he’ll want a victory that’s easier than Iran. Seizing Greenland may be off the table then, but Cuba might be more likely.
What stopped the ships initially was the withdrawal of insurance cover.
We will know there is a realistic agreement when insurance cover is restored.