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There is still no clear sign that negatioations between Iran and the U.S. are currently underway. Trump says Iran is “begging” for a deal and Iranians say there is no deal. If you watch the price of crude oil you can follow the narrative almost to the dot. If negotiations hit the tape, oil price goes down, when they are denied it goes up. What seems to be true is that 5000 marines are already in the gulf, waiting to attack. The target seems to be Kharg island, bit perhaps the

The U.S. is negotiating terms with Iran to end the war. We don’t know who is the Iranian negotiator, and we don’t know if they will abide to agreed terms. At the same time, the U.S. is sending troops to the region to be prepared in case negotiations fail. Perhaps even if they succeed. Markets are unease about the outcome. So much so, that yesterday’s 2 year Treasury auction was bad. The yield rose to 3.9% and its stable around those levels (see chart below). This is very impo

We’re in the middle of the 4th week of the Iran conflict where Trump is getting anxious about it and mentioned that the US and Iran had held “very good and productive conversations” over the prior two days regarding a “complete and total resolution of our hostilities in the Middle East.” As a result, he instructed the US military to postpone any and all strikes on Iranian power plants and energy infrastructure for five days, subject to the progress of ongoing discussions. Thi

After two weeks of conflict, and two weeks of closure in Hormuz, 23 nations have signed a joint statement condemning the closure and pledging readiness to ensure safe passage. But no commitment of war ships, no escorts, no military operation. The world is choking, and someone thought they could ask Iran to reopen the strait, when that’s perhaps the only effective negotiating card they have left. Furthermore, neither the U.S., nor China or Israel are signing the letter. Countr

The conflict in Iran just enter its third week. Mix signals from President Trump regarding the evolution of the war: from boots on the ground, to take control of the Kharg island, to winding down the conflict because the goals have been achieved (whatever those were). We’ll probably see a few more changes, but the fact of the matter is that even though leadership in Iran has been decimated, and major infrastructure (energy, nuclear, military) has been destroyed, no official s

As we enter the third week of the conflict in Iran, yesterday was a clear example of the ripple effects and the interconnection of markets. On the top chart you can see the real estate index in Dubai, 60% lower since the start of the war. On top of that, as bombing intensifies, people took their deposits out of banks creating a bank run, which forced (allegedly) the Central bank to sell its gold reserves to defend the currency and support local banks, causing a 10% drawdown i

The Fed left rates unchanged as expected, and in the press conference, Powell categorized the current economic environment as “difficult”, but with a resilient labor market. He mentioned that Inflation remains somewhat elevated and isn’t coming down as much or as quickly as hoped. Those comments came on the back of the PPI report, yesterday morning, where Producers prices spiked to 3.5%, and excluding food and energy, 3.9%, as you can see in the bottom chart, below. The key

Today at 2 pm the FOMC committee will publish its decision on rates. No change is expected. And no change is expected fo April either. There will be no meeting in May, where Kevin Warsh is supposed to be confirmed as chairman, and June will be his first FOMC. In the chart below you have the odds for rate cuts in June. Not looking too exciting. At the same time, there are reports that have calculated the impact on inflation if oil reaches $150/barrel and somehow stays there. C

The March FOMC committee starts today and will conclude tomorrow with the oficial decision on rates. No cuts are expected, which will prompt another tantrum from the President, that knows that the risk of a recession is increasing and the pressure on equity markets is mounting. But it’s not only that the Fed will not cut that worries the market. Take a look at the bottom part of the chart below: the probability of rates being higher than they are today has increased from less

We are starting the third week of the conflict and Hormuz is still effectively closed. Even though Iran says that ships that are not American or Israelis can cross, insurance companies have not changed their position, as the risks continue to be too high. Oil is slightly down today, but is up 16% over the last week alone. As you can see on the table below, Emergy is now the leader sector of the S&P500. And this creates a conundrum: if the conflict eases and oil flow is re est

After more than 230 rate cuts over 2 years by global central banks, now it’s the turn to hike. Or at least to think about hiking. If you look a the charts below, the top one shows the expected path for official interest rates in the U.S. at the beggining of 2026 (orange) and today (blue) using Fed Fund Futures. If there was going to be 2-3 cuts this year, right now, that expection is basically gone. The bottom chart shows the same conclusion for global central banks, with the

The center of attention continues to be the conflict on Iran. The US bombed yesterday Kharg island, a major oil infrastructure hub for Iran, and Iran continues to attack Israel, and Israel continues to attack the south of Lebanon where Hezbollah is located, which in turn continues to attack Israel. It does not look like the conflict wil be scaling down any time soon. In fact, the Sansom option, Israel’s unofficial, undeclared nuclear doctrine referring to a strategy of massiv

All roads lead to debt. That’s what investors are finding out these days. Let me elaborate: the Pentagon jus went to Congress to ask for $50 Bn to rearm the US military, since the cost of the first week of attack has been $11Bn. The best part? Congress did not authorize the war. If they agree, and it’s likely they will, this will be added to the deficit, and we’ll end up in the Treasury mandate to finance it. Today, Iran sent a suicide drone into Dubai and hit one of the most

There were no surprises in the U.S. inflation report yesterday. Both core and headline inflation came in line with expectations, at 2.5% and 2.4% respectively, and as you can see in the chart below, with a trend to stabilization, still above the 2% target, but close enough. The problem may start to come in March, as the oil shock due to the strait of a Hormuz closure hits gasoline prices at the pump. But the real kick may appear in April-May, as there is a lag in the transmi

The U.S. will publish today the CPI fo the month of February, a data point that will not include the oil shock due to the Iran conflict. Hormuz is still effectively closed, and Iran has just bombed a Thai ship that ventured to cross it. The U.S. Navy has declined to escort ships through the strait, arguing the 100% probability of a strike. Private credit woes continue, now with major banks marking down the loans in those funds that are used as collateral to juice returns. Pri

According to president Trump, the war is almost over. In his words, it’s been a “short excursion”, and he’s trying to de escalate the conflict, which leaves the question about what was the purpose of the attack in the first place, since it’s not clear what has been accomplished: if Americans and Israelis retreat, without Iranians conceding a victory, without a regime change and without stopping their uranium enrichment program, it would appear as if it was indeed a misdirecti

Oil keeps going up, and the current shock has become one of the most important ones in history and, as it usually happens, all kind of historical statistics start to pop up, which are informative of what happened in the past, and influence what can happen in the current episode. The bottom table below shows the duration in days of wars since the 1990 Gulf war, the stock correlation and stock max drawdown. Notice that the biggest stock drawdowns occur when the duration of the

After one week of the conflict in Iran, we can already see the impact on the global economy, and how, if sustained, it’s going to leave its mark on the world, perhaps like the pandemic. Despite the fact the U.S. is a net oil exporter, gasoline is up in the U.S., is going up in Europe, and it will be probably up in China. But one thing that is getting clearer is, who was ready for this conflict (or any conflict for that matter) and who wasn’t. The big loser so far is not China

Things are starting to get interesting. The U.S. unexpectedly lost 92,000 jobs in February (it was expecting a gain of 58k), and the unemployment rate ticked up to 4.4%. Oil prices keep going up, which means that gasoline will go up, and the conflict with Iran, which was expected to be short lived, seems today as it will be more than “a few days”, with the Pentapn now expecting the conflict to last till September. That’s way too long and way too close to the midterms. We cann

Expectations of a rate cut in the March 18th FOMC meeting are almost gone. A partial victory lap for J Powell which has seen his prudent approach to inflation concerns validated by the war started by his main critic. If you look at the chart below, you can see that PCE, the Fed’s preferred measure of inflation, will go up 20 bps if there is a 10% shock in the price of oil. It’s almost 50% up YTD. Gasoline will be the main transmission mechanism, but not the only one. The impl