Head fake?

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. This was tied to Iran’s partial disruption of the Strait of Hormuz (after he had threatened to “obliterate” power plants if it wasn’t reopened). He described it as giving Iran “one more chance” and noted talks would continue through the week. But the attacks on non power plants and Energy infrastructure have continued. The financial cost of this war is soaring, as well as the political cost. Back at home, security at major U.S. airports has become a big mess, because TSA employees are not being funded by the government as the Democratic party keeps putting pressure on Trump. And the private credit drama seem to be accelerating, with more gates applied to redemption requests (Apollo) and a downgrade to junk (FS & KKR). This is getting to a point where the ECB is starting to formally look at banks exposures to private credit. Treasury bond yields are not convinced of the peace talks, and remain mildly elevated, while crude oil, a more nervous indicator on the war, remains volatile but under $100. The market is waiting for Friday to see if there are truly new war ending developments, or if it’s just another head fake.

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