• Why suppose peace will be driven by the price of oil and its effects?

  • I’m not sure Trump is under any pressure to make a deal. He had greater cause to strike one earlier in the war. Two weeks ago he needed to find a way to stop bombing Iran – the topic was tiring him: he wants more freedom to roam when talking to the press than a war allows. Then he needed to find a way out of the bind he’d created for himself: his two-week ceasefire was due to end this week, and then what? He’s now extricated himself from that burden with an indefinite ceasefire. He is no longer at war or on the clock.

  • The only other source of pressure – also much more severe several weeks ago – is the market, by which I mean the price of oil and the stock market. If oil is rising and stocks are falling, Trump’s under pressure. But US stocks have been surging for three weeks now, and oil is 20 per cent off its wartime high.

  

  • If Trump isn’t under pressure, is Iran? It’s hard to see how. The IRGC once again reaffirmed its control of the Strait yesterday – firing at three ships (one of which escaped) after they attempted a dark crossing overnight. Iran can survive a US blockade of its oil trade for several weeks before it needs to shut-in any production, and that blockade – while effective when it wants to be – is porous at best. Iranian oil is getting in and out of the Strait. The militia that now runs the country isn’t likely to fold fast under economic pressure anyway.

  • Iran also hasn’t made its control of the Strait pay yet. Its aim here is to re-establish deterrence – to make clear to the US and Israel that attacking Iran is suicidal for the world economy, and thus inadvisable (at least for America). No one has yet learnt that lesson. The market is, in fact, learning the reverse so far. The Strait has been closed for 54 days and the economic reaction is currently: so what? The market is “looking through” the present conflict. It will do so next time too if this closure doesn’t have greater consequences.

• There’s plenty of reason to think this conflict is going to have great consequences. But that’s in the future and decisions are being made under the pressures of the present. I don’t think Trump feels pressure before it hits – he would never have made it through all the tension of his life if he did – and Iran hasn’t yet made the world notice the stress it’s under. So why would either party lift their blockade?

• Prediction markets suggest there is a 75-80 per cent chance Trump lifts his blockade by the end of May. They think there is only a 50 per cent chance that traffic through the Strait will approach its pre-war levels by then. So the US blockade is considered more likely to be lifted than Iran’s blockade of the Strait.

• The market thinks there is a near-40 per cent chance Trump lifts the blockade much faster: by next Thursday. But what is Iran going to give him that spurs that?

• I may be wrong. This may all be being resolved through back channels as I type. You can find plenty of suggestive reporting along those lines in outlets like Axios, but you wouldn’t have fared well trading this crisis if that was your source of truth. 48 hours ago, everyone assumed the US and Iran would meet for talks in Islamabad by today. What current confident assumptions crumble next?

• Here are the two ships Iran intercepted in the early hours of yesterday morning, Epaminondas and MSC Francesca:

• Both are operated by the shipping company MSC. It turns out these two ships were part of a bigger group of MSC ships I first noticed over the weekend. I’ve circled those below. I was focused on a handful of other ships, operated by CMA CGM, that had been forced by Iran to turn around on Saturday morning. I supposed the MSC ships would wait at Khasab given the Strait’s closure.

• But they didn’t – they snuck out on the blue path. The two ships captured by Iran tried to follow this first group. Both sets of ships turned off their automatic identification system (AIS), which hides you from nautical maps. This captures it:

• This is the sort of thing that makes me think the Iranian Navy is going to be loath to give up control of the Strait. The appetite comes with the eating. They are still early in the process of establishing their right of domain. They have since released this video showing armed and balaclava’d men boarding the vessels:

• Here’s a vivid picture of what analyst believed to be “a flotilla of IRGC fast attack boats” crossing the Strait, slightly to the north of where the two ships were taken.

NB

• This chart, from Goldman Sachs, gives you a sense of what’s coming. A familiar refrain in Empire Hour thus far, courtesy of Jeff Currie, is that we’re experiencing Covid inverted. This chart, of global oil inventories, is in line with that.

• Covid led to an oil glut: global inventories rose by 800 million barrels. We are already set for 600m lost barrels if Hormuz opens this week. It won’t. If it takes another month to open, the loss will match Covid. Covid led to a collapse in the oil price, hence the expectation that oil must – in the end – surge this time.

• “We will see a sudden repricing at some point,” as one trader told the FT. (Link)

• Niall Ferguson, whose gleeful copy on day 1 of the war promised the conflict would be short, is now suggesting a “final compromise will take longer to be agreed upon than Mr. Market currently believes… remember: It took Henry Kissinger more than four months to get the 1973–1974 oil embargo lifted.”

“Small showers last long, but sudden storms are short.” – John of Gaunt, Richard II (1595)

• On Friday afternoon, traders thought there was a >50 per cent chance that traffic in the Strait of Hormuz would return to normal by the end of the month.

• The correct probability was 0 per cent. Hope sprang from a strange source – this tweet by Abbas Araghchi, Iran’s foreign minister, on Friday lunchtime:

  • “In line with the ceasefire in Lebanon, the passage for all commercial vessels through Strait of Hormuz is declared completely open for the remaining period of ceasefire, on the coordinated route as already announced by Ports and Maritime Organisation of the Islamic Rep. of Iran.”

• That message, as anyone who read it could see, did not open the Strait as it’s commonly understood. It told the tankers and container ships trapped in the Persian Gulf to take Iran’s newly mandated passage if they wished to leave – i.e. to take the Tehran Toll Booth, as it’s come to be known, marked in yellow below.

• Tankers captains understood this. They began to move towards the island of Larak, following the Iranian route. (If they had thought the Strait was open they would have taken the green pre-war path through Omani waters.) They paused on Friday evening, then continued overnight. On Saturday morning several ships – two Indian-flagged, one French-flagged – were hit as they rounded Larak to the south. Everyone retreated. Even the Tehran route, it turned out, was now closed.

• It’s not clear who’s running the Strait, even within Iran. Listen to this VHF broadcast by the IRGC’s Sepah Navy from Friday evening if you haven’t already.

  • “This is Iranian Sepah Navy calling on channel 16. The Strait of Hormuz is still closed. We will open it by order of our leader, Imam Khamenei, not by the tweets of some idiot [Araghchi]. If you want to pass through the Strait, you must ask permission of Iranian Sepah Navy. All vessels that have a connection with our enemies will be targeted if they try to pass the Strait of Hormuz. Out.”

• By Sunday, Iran was turning back two US-sanctioned tankers (circled in the image above) associated with their own oil trade. Why would the IRGC do that? Perhaps to avoid the US blockade downstream, which is proving to be real after early indications to the contrary.

• That became evident to everyone last night when Trump announced that the US Navy had struck an Iranian vessel that failed to comply with its orders to halt.

• The ship, TOUSKA, may have been part of Iran’s missile fuel trade with China. Iran has promised retaliation, and says that the US has violated the ceasefire.

• You can see the blockade in effect below. This is 10:45 BST on Sunday, which is when a US-sanctioned tanker, RAINE, was forced to turn around by the US as it tried to leave the entrance to the Gulf. Click here to hear the US intercept a third interdicted ship, BLUESKY4. Another ship stopped short of the line last night.

• The US blockade is about 300 nautical miles away from the Strait of Hormuz:

• We may now simply be entering a new phase of the war, in which both Iran and the US have each established the efficacy of their respective blockades.

• Who, then, blinks first?

• The problem for the world economy is that neither side is hurting yet.

• Iran has plenty of capacity to endure a long blockade of its oil supply:

• The many oil experts – oil cataclysmics? – whom I’ve quoted in dispatches to you have said that oil prices will spike to confidence-sapping and demand-destroying in weeks not months, i.e. before Iran is forced to shut-in any of its production.

• The price of oil spiked 6 per cent at the open last night as markets adjusted. But it’s still down >20 per cent on its wartime high.

• This is part of the problem: the costs of war aren’t registering with Trump.

• He revelled on Friday while recounting the pre-war predictions of doom he heard from advisers: “‘Sir if you do this, fuel is going to go to $300 a barrel!’ I said – I don’t think so, I think we’re going to be good, we always find a way. ‘A depression is going to happen!’ Well, not going to happen, because we just hit a brand new all-time high.”

• He was referring to US stocks. The tech index is up 17 per cent in three weeks as investors fixate on a perceived wave of explosive AI demand.

• Oil remains suppressed. We have a long way to go until Trump thinks it’s too high.

• The IRGC have to “reestablish deterrence” before giving up the Strait. They need to make the cost of attacking them prohibitive. But the cost of attacking them, for Trump, hasn’t yet been prohibitive at all. Doesn’t that incentivise Iran to keep holding the Strait until oil has surged and an energy shock has struck the West?

• There’s an alternative path here. The war ends fast, and this week looks like this:

  • The Iranians are expecting that there will be a symbolic joint announcement of an extension to the ceasefire on Wednesday. Then if things go smoothly, and US President Donald Trump agrees to go to Islamabad, the Iranian president would also go and there would be a “joint meeting of presidents” where they would sign a joint “Islamabad declaration,” the sources added.

• That’s CNN, paraphrasing Iranian sources in Islamabad. It reads like a believable Trump end game: fly in, secure a headline peace, get out, move on.

• The real talks would then begin, far enough away from the news for Trump to pay them no attention, yet solving nothing. As a European source told Reuters: “There will be a bad initial agreement that creates endless downstream problems.”

• As one correspondent puts it, in anticipation: “A Gaza ceasefire-esque deal that’s basically just a bunch of bullet points and a promise of future specifics that Steve Witkoff [Trump’s special envoy] has neither the desire nor expertise to hash out.”

• There’s no good outcome here. If Trump gets a quick deal, he will only emerge emboldened, having reaffirmed his talent for slipping the world’s punches.

Eye on the market

• There is a lot of residual enthusiasm in stock markets that could yet collapse.

• This swiggily yellow line below give you a sense of how “oversold” or “overbought” the US tech market is deemed to have been at any time over the past year. Last April’s tariff-induced sell-off is to the left. You can see the sudden upward surge in the past fortnight on the right. Everyone wants stock right now.

• Why? Because the US market is focused on a new shortage: not of oil, but of semiconductor chips.

• The dotted lines in the graph below, which takes a minute to parse, show the availability of various types of Nvidia chips since Sept ‘24. Start-ups rent out the use of these chips in order to provide AI tools and services to customers. A lack of supply indicates a surge in AI demand.

• This recent line from Steve Eisman – who predicted the 2008 crash and is depicted by Steve Carell in The Big Short – captures how people now think:

  • “Since the Great Financial Crash, there’s almost [been] this competition of who’s going to predict the next demise. And every couple of years something happens. There’s an oil shock here, there’s Covid; since the Crash there’s probably been six or seven things. Someone comes on your show and says ‘this is it, this is the end’ – and it’s not. The actual, amazing story since the Crash is how incredibly resilient the US economy has become.”

• I’ve marked the typical pre-war path of ships in red. SHALAMAR is following the new route mandated by Iran, between Larak and the shark-shaped island of Qeshm. The departing tankers also followed the Iranian route yesterday.

• Another tanker has already made it through. A third turned back after the US broke off talks; SHALAMAR almost gave up too. A fourth tanker, also Pakistani-flagged, is now making its way in at Iran’s discretion.

• Iran’s control of the Strait is not going to be sustainable, as the countries of the Gulf have made clear. Here’s the UAE’s relevant minister, posting an hour or so ago: “The Strait of Hormuz has never been Iran’s to close or restrict… The world simply cannot afford it and must not allow it.”

• You need two things for the world’s oil supply to come back online: Iran to allow ships to pass unimpeded, and Gulf suppliers to agree to load them up with oil.

• Gulf countries, as past oil crises made clear, can cut exports and still thrive as prices subsequently spike, or stay elevated. A reminder of global oil supply. Gulf suppliers in gold:

• You need two to TACO, analysts pointed out over the past month as people speculated about a Trump withdrawal akin to his (partial) tariff backdown last year. Iran had a vote too. The same applies now: the Gulf has a vote on the Strait.

• Saudi Arabia and the UAE, as noted on day 40, have bypass pipelines that are allowing them to maintain material exports. Their export volumes are down by a quarter to a third, but the pre-war price of physical barrels has doubled~.

• If Iran remains a threat to the Strait, they can withhold supply, keeping prices high.

• Trump is, as ever, soloing his way through a free jazz session. Asked about the Strait on Friday, he went within seventeen seconds from “that’ll open up automatically… if we just left,” to “it won’t be easy. I will say this, we will have that open – fairly soon.” The guy has no idea. He didn’t intend to be here.

• “The Iranians don’t seem to realize they have no cards, other than a short term extortion of the World by using International Waterways,” he subsequently posted.

• Trump’s chief economic adviser, Kevin Hassett, was no more convincing on Fox earlier in the day. Asked whether the Strait could be opened within two months, all he could say was “yes… we’re very, very hopeful.” The A-team, he said, was on their way to Islamabad for talks with the Iranians. So much for those.

• We already know what Trump thinks of the talks. “He’s working on the deal,” he said of Vance last week. “If it doesn’t happen, I’m blaming [him]. If it does, I’m taking full credit… I think it has to happen. They’re desperate.”

• Iran isn’t. But I’m not sure Trump is either. He has, after all, laid out his view on clearing the Strait before: 29 years ago, when US naval convoys were engaged in protecting Kuwait-owned oil tankers from Iraqi attack. Here’s what he said then in a full-page ad he took out in the New York Times and elsewhere:

  • “For decades, Japan and other nations have been taking advantage of the United States. The saga continues unabated as we defend the Persian Gulf, an area of only marginal significance to the United States for its oil supplies, but one upon which Japan and others are almost totally dependent. Why are these nations not paying the United States…? Saudi Arabia, a country whose very existence is in the hands of the United States, last week refused to allow us to use their mine sweepers… The world is laughing at America’s politicians as we protect ships we don’t own, carrying oil we don’t need, destined for allies who won’t help.”

• Is Trump going to restart a war he’s bored by to clear a Strait he doesn’t think America needs? “Don’t forget, we don’t use the Strait – other countries use the Strait,” he reiterated on Friday.

• Trump is now reposting suggestions that the US blockade Iranian oil. Robin Brooks, the macro strategist, advanced that idea on here weeks ago, noting that Iran’s export-driven economy is entirely dependent on oil and gas (Iran is the world’s #4 gas supplier, behind the US, Russia and China). Others agree with him.

• This would be some shift. Trump lifted sanctions on Iranian oil on day 20. That was designed to lower oil prices (more Iran oil = more global supply) but all it did is withdraw any pressure on Iran to open the Strait.

• Remember: Trump’s Tuesday night ceasefire was supposed to be conditional on a full reopening of the Strait. That’s why the price of oil fell 16 per cent and stocks surged. Oil has stayed down even as the new reality in the Strait has become clear.

• Energy analysts are sceptical this will last. Here’s Amrita Sen, last seen in Empire Hour interviewing Jeff Currie, talking to CNBC on Thursday:

  • “Once the dust settles, and people realise the ceasefire actually doesn’t mean we’re going to get a material flow of oil out of the [Strait of] Hormuz, we think prices will go back up again. Unless we reverse the 13 million barrels per day of [Gulf production] shut-ins, we are losing that much volume… every single day – and that means we just need higher and higher prices ultimately to balance the market.”

• Sen makes another subtle point: you need tankers to export oil out of the Strait – and many of them are now en route to the US or Europe, taking oil to Asia or Australia. “For the ships to go back,” she said, “it’s at least June” until they’ll arrive. That’s 7 weeks.

• The American stock market has moved on, such is the perceived strength of AI demand. (Taiwan Semi, the world’s leading edge chip manufacturer, reported blowout monthly revenue growth on Friday: revenue is up a third over the first quarter year-on-year – a growth rate that would make the British stock market keel over in shock.)

• Can this calm last? The AI trade is power-dependent. The 9 per cent dip in March was nothing. Stocks typically fall almost 15 per cent intra-year, going back to 1950. The market fell less than that – and is now back up – despite this being, in theory, the biggest energy shock of our lifetimes with no resolution in sight.

• As always, selling is inadvisable if you’re going to hold and endure for a couple of decades. Stocks tend to pay you more than bonds if you can handle the volatility, so long as you don’t buy the Nasdaq in 2000 – it took 15 years to recover its peak.

• Until then, here’s one oilman’s verdict: “A lot is being made of the disconnect between futures and physical oil markets... the scarier disconnect is between oil markets and broader equity/capital/fx markets, which remain mostly unfazed. A freight train is coming for the global economy via fuel prices and availability.”

• Trump unilaterally walked away from the conflict last night in order to escape his own ultimatum. He’s left the region to fend for itself. Why wouldn’t he? He doesn’t consider America to have any allies in the Middle East, only interests, and marginal ones at that. He wanted out and was willing to sell at any price.

• His two-week suspension of US strikes, announced almost 24 hours ago now, was supposed to be conditional on Iran “opening” the Strait of Hormuz. But Tehran already considers the Strait to be open. There was no agreement on what this meant. Trump doesn’t seem to care. We shouldn’t be surprised. He doesn’t see the Strait as his problem, as he’s made clear repeatedly for weeks.

• Hegseth also put out the house line on this earlier at his typically brief press conference: “We barely get any of our energy out of the Strait – just a tiny fraction – it’s up to the rest of the world to step up and ensure that it stays open… Iran is voluntarily opening it right now,” he said.

• Try telling that to the tanker crews in the Strait. “If any vessels try to transit without permission,” they were told by Iran this morning, they “will be destroyed.” (The FT reports.) The Strait – the old toll-free central channel – remains shut. If you’d like to pass Go, you have to go through the Tehran toll booth to the north of that channel, between the islands of Qeshm and Larak, as Lloyd’s List reported on day 26.

• Here’s the key quote from Lloyd’s today: “Just three vessels were tracked transiting the Strait of Hormuz since the US-Iran ceasefire was announced early on Wednesday, all with current or past links to Iran. A further three vessels are positioned to cross or were heading for the Iran-approved detour around Larak Island.”

• Nothing’s changed: three vessels a day have left the Strait throughout the war.

• Oil prices nevertheless collapsed earlier, falling more than 15 per cent overnight, while stocks surged – peacetime stocks in particular. Rolls Royce and Ryanair, which both represent bets on the availability of jet fuel, each leapt 12 per cent. The South Korean stock market, half of which is a bet on two AI-geared memory chip companies that need fuel, rose 9 per cent. Taiwan Semi, the world’s most important chip foundry which is reliant on Gulf LNG supplies, jumped 6 per cent.

• Mohammed bin Salman (MBS) and Mohamed bin Zayed (MBZ), the respective rulers of Saudi Arabia and the UAE – who have their own conflict – will, regional experts suggest (and sources close to them tell the FT), sooner withdraw supply than pay Iranian tolls. They can continue to bypass Hormuz through back-up pipelines. They will export less oil but at a higher price, which their restriction of supply will ensure. Higher prices will compensate them but not the world. Other Gulf states – Kuwait, Iraq, Qatar – are dependent on transit through the Strait.

• Iran did today hit the East-West pipeline through which Saudi currently bypasses Hormuz, but initial reports indicate the flow of oil was undisturbed.

• An Iranian oil refinery on the island of Lavan was also struck. The US and Israel both disavowed responsibility. Iran is blaming the UAE.

• Here’s one Iranian energy expert’s view on the past 24 hours: “Seems like the US told Iran that it would halt bombing, Iran said OK, and apart from that nothing else has been clarified. Hormuz, GCC [Gulf Cooperation Council] attacks, Israel-Lebanon. All still up in the air. Oil market will realize that soon enough.” Other oil experts have a similar view. Control of the Persian Gulf remains unresolved. The war continues.

  

  ---

• It’s not yet visible in food prices. And not all fertiliser prices are shooting up either, despite the shock to urea supply (a fertiliser that I too only recently discovered the existence of). There’s not yet cause to believe the latest cataclysmic post that some exceedingly earnest tech product manager has probably put on X.

• Where can we see a cascading effect? In the crude oil supply chain. The price of crude itself – the almost-molten liquid out of which a litany of essential fuel products are created – has ticked up this week after the futures market reopened Sunday night. But the place you can really see the supply shock is in the price of diesel: one of the “middle distillates” made by refining crude. Here’s the price of diesel delivered to New York since 1985. We’re at all-time highs:

• NY diesel is up 73 per cent in 5 ½ weeks. There has never been a spike like it. We’ve had spikes of similar magnitudes before – prices rose almost 60 per cent over 3 ½ months in spring ‘22 after Russia invaded Ukraine, and almost 70 per cent throughout the first half of 2008 – but nothing this sharp, this fast.

• Trump managed to talk down the price of crude two weeks ago. You can see brief evidence of that in the price of diesel below, when I narrow the chart to 2026, but reality soon reasserted itself. If supply remains constrained, the price should rise.

• Gasoline, the fuel price American drivers pay, is also made out of crude. In 2022 Trump blamed Biden for causing gasoline prices to spike when Putin was to blame. Now an American president is actually responsible for an even faster spike:

• The US military build-up continues. Artillery brigades are en route:

• More here from energy industry legend Jeff Currie – the man with the lilt, the hair, and the assured prophecies of doom. In short: he expects oil to spike to a demand-destroying peak in mid-to-late April. By Currie’s estimation there was a buffer of around 800 million barrels of oil at the start of the War. Half of that was used up in March, even with the release of strategic reserves (a release that isn’t really happening yet in the US). The rest is being used up now, this month.

• Remember: even on days with no news of fresh strikes, the amount of oil missing from the world has gone up.

• Currie sees this as Covid inverted: the size of the shock is similar, and it too is spreading around the world. (“I remember thinking then [in late January 2020], the second-largest economy in the world [China] has shut down. This has to be bad. It took six weeks [to hit] then.”) His term for our crisis now: “molecular contagion”.

• He thinks this is going to be great for China, as Covid was. More on that soon.

• Bob McNally, a Bush-era White House official, is another man of deep experience raising his voice. He expects further escalation.

• Helen Thompson, the energy-focused Cambridge professor, spoke to Bloomberg. Britain is on the peripheries of this crisis – our political debate in parliament is, as usual, little more than fine material for good comedy – but Helen explains how decisions made since the ‘70s, and especially the ‘90s, have left Britain exposed to every energy shock. If only we had any unexploited reserves of oil and gas left to drill in the North Sea. Nuclear’s good too.

• Talking of comedy, here a few notes, written at the time, from Trump’s press conference yesterday – following the rescue of two American servicemen – to give you a sense of how much more absurd these events are than news reports reveal:

  • He’s arrived with SecDef Hegseth; Dan “Raizin” Caine, the alert, lyrical, diminutive Chairman of the Joint Chiefs; and John Ratcliffe, the tall CIA Director.

  • It’s been one of our best Easters, Trump says.

  • Nobody has the machines that we have. (We’re America.)

  • The weapons officer they saved this weekend had “a very sophisticated beeper-like apparatus.” Trump’s talking. “When they [the men] go out, they make sure they have lots of battery space and they’re in good shape – and this one worked really well.”

  • The C-130 transport planes America had to blow up on their way out were, Trump says, “old, very old”. They cost $100m~ each.

  • It was tough terrain out of which to fly. “You would call it central casting if you were doing a movie, for a location.” (!)

  • “God was watching us – it was Easter territory, I guess.”

  

  • Trump’s been talking about the rescue in almost mystified terms for some time now. It was a-mazing, in short. (It was.)

  • John Ratcliffe is keeping his head bowed while Trump describes him as a man so out of central casting that he would play the head of the CIA in a movie.

  • Ratcliffe, whose surprisingly folksy voice would be fit for a Southern talk radio show, has spent most of his time praising the Supreme Leader who introduced him.

  • Here comes Hegseth. No need to dwell on his penchant for cutaway collars, strobe-striped ties, brown shoes, and too-blue suits that don’t fit.

  • After quite a bit of bluster, Hegseth is now also turning to his kingly benefactor.

  • Raizin Caine is a giant among these taller men. When he starts speaking, you wake up. He paints scenes. He could have filed with the best of them.

    • “On Thursday 2 April at 10:10pm Eastern Time – 4:40 in the morning, local Iran time – the Joint Personnel Recovery Center, which handles the Central Command Area of Responsibility, declared an Isolated Personnel Recovery Event for US Air Force F-15E Strike Eagle – call sign DUDE44 – which was down in hostile Iranian territory. The pilot and weapons system officer had both safely ejected and were isolated behind enemy lines. Following confirmation of active rescue beacons, and on the direction of the Secretary [of War] and by order of the President, a rescue operation was launched with the stated purpose of bringing both Americans home…”

    • More on Raizin here.

  • Trump sounds like he’s revealing operational secrets.

  • As a president you have to have good instinct. A lot of this is instinct. (He says.)

  • I’m a business man first, says Trump, of taking Iran’s oil. “To the victor go the spoils,” he says. “What happened to that?” I’m paraphrasing him into coherence.

  • Trump’s now talking about running for President in Venezuela after leaving office, and learning Spanish in preparation for that. Not sure he’ll need it.

  • Trump has modelled his scowl on Churchill’s, right?

  • Nato’s a paper tiger, Trump says. “Putin’s not afraid of Nato – he’s afraid of us. He’s explained that to me many times.” Upholding the alliance as ever – on ice until 2031.

  • You know who else didn’t help us? Trump says. South Korea, Australia, Japan. He’s wondering why America has 45,000 troops in South Korea (they have 28,000) when Kim Jong-Un is “very nice to me”.

  • Back to Nato. “It all started with Greenland. They didn’t want to give it to us, and I said, bye bye.” He walks out.

NB

• No change in Iranian missile capability. Drone fire is going up. This is after 20,000 US-Israeli strikes.

  

• A young journalist at the BBC is being accused of making up quotes – quite consequential ones. It’s not yet clear what happened, but the piece in question has now been edited without a stated correction. How did this get through?

• It’s a reminder that so much journalism is taken on trust by editors. You are rarely asked where a quote is from, and I can’t remember ever being asked to prove a quote’s provenance. A newsroom is, rightly, a high-trust society. You are largely self-regulated. It comes down to your own integrity. “It’s an honourable profession. Dress up for it.”

• I’m going to write something longer on Lebanon following conversations I had in Israel. Until then, how is anyone meant to return here? (More evacuation orders.)

• The Journal reported on the 20,000 seafarers stranded on tankers in the Strait.

Programming notes

• I intend to send out this email each day around lunchtime (liberally defined) when the markets are open. I’m writing this to make sense of the mother of all crises as it unfolds, if that is what this proves to be.

• Information is more scattered now than ever before – you have to find it in the saner corners of X, inside podcasts, in old books. Like gathering leaves. If you’re finding this useful and think someone you know might, please send it their way.

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• The Articles of the Constitution, I heard The Atlantic editor Jeff Goldberg say a couple of months ago, are a set of “vaccinations against tyrannical monarchy. We’re now literally experimenting with how good these vaccines are. That’s what this whole period is. They made these vaccines 250 years ago, and this is a test of whether they actually fight the infection of populism.” More on that here. I sat down with Ken Burns, who has spent 10 years studying the American Revolution.

When you do sit across from him, he is eager to answer your question, and eager also to extend and encapsulate his points when he does. He has an irrepressibility – almost a sense of duty in trying to give you something worth writing down. Perhaps he just knows a lot and wants you to know it too. His vim, undimmed at the age of 73, is inherent in his face. I doubt it would have been repressed wherever he had ended up. But he ended up in the right place for it to find free rein: a village in New Hampshire (Walpole; population: 3,633), where he has lived in the same house for 47 years.

“I take a walk every morning, three miles or so, and I can’t begin to tell you how many filmic problems I’ve solved, how many other kinds of things I’ve solved – letters I’ve written in my head and not sent, ideas I’ve had for speeches or poems, or solutions to the film – because of the space to do that,” he told me. “Nature is a really accurate mirror, and you can’t fool anybody when you’re there.”

• Trump somewhat ominously contrasted the duration of his “excursion” with the length of the Second World War. Why, he implied, is anyone complaining?

• There are two variables governing all right now: (a) Trump’s psychology, (b) its impact on global energy supply. Trump, naturally, has no idea how his actions affect energy supply. He only controls one throttle here: the US military. The market has spent much of the past month acting like he controls the entire arena, and oil will spring back online at his command. Experts suggest otherwise.

• A few key points:

  • First, that’s “Hormuz closed until [at least] May, folks,” as one consistently astute observer put it after watching Trump speak.

  • Second, the continued shut-in of Gulf production this month is going to wipe out the 400 million barrels of reserve supply currently being released to the market by the International Energy Agency. The loss of oil in April will be twice as bad as the supply shortfall in March, the head of the IEA said yesterday, as there are no more overhanging cargoes on water, as there were then. The smiles in this thumbnail are not reflective of the conversation:

  • Third – and this may be the most critical point – markets are conflating a Trump withdrawal, or TACO [Trump Always Chickens Out, a beloved market phrase coined by a FT journalist last year] with a reopening of the Strait: “They are not the same. TACO doesn’t reopen anything. It entrenches Tehran’s veto. Even if flows resume after TACO… it will be messy, partial, and conditional – think bilateral carve-outs with “friendly” countries. Russian style… Markets are not priced for this.” (Link)

  • As a result, and as discussed yesterday: “We are about to go through Covid-inverted: the biggest supply (vs. then demand) shock in history, happening so quickly and violently that the average mind just can’t go there… yet. Energy shortages and inflation spike imminent.” (Link)

• People are judging Trump’s speech a failure for failing to calm the markets, but I think it’s the other way round: yesterday’s calm licensed his natural inclination to attack. Whenever oil drops and the market spikes, Trump thinks he has leeway.

• Again: markets are closed tomorrow. Trump has three days free of judgment. Are markets really going to fall for another “we’re wrapping this thing up, Iran want to surrender!” Trump post at 7am on Monday morning after a weekend of attack?

• A commando raid to seize Iran’s enriched uranium was requested by Trump, the Washington Post reported. Did a military source leak that to flag the raid’s deep inadvisability ahead of time? Hard to read this and think it’s going to go well.

• And the uranium may not be there.

• I get the market’s reluctance to sell. I’ve been following stocks with varying degrees of attention since late ‘08/early ‘09 and it has never paid to sell in that time. The Nasdaq has compounded by 20 per cent annually for 17 years. One more time: it has, on average, increased in value by a fifth every year for 17 years. As a consequence, it’s up 23x since March 2009, when the market bottomed following the Great Financial Crisis.

• Very few have made that return. People bought and sold along the way, often at the wrong times. That has conditioned a lot of them to hold now, or buy any dip. No one wants to miss the next elevator up.

• It’s all a question of your time horizon. Are you trading or investing? The market tumbled in 2022, then took all of 2023 to recover its 2021 highs. There was no reward to holding stock for two years. Then the Nasdaq kept rising in 2024, 2025.

• Most people in Britain don’t think about the Nasdaq, although they spend their lives on the devices, tools, and platforms owned by the companies that make up the index. Instead we are advised on how to save £40 on a fridge by Martin Lewis, or encouraged to switch from one morsel-paying savings account into another.

• The coming energy crunch – if it’s as bad as feared – will, as stock prices fall, increase the expected future returns of good financial assets, i.e. tech business that have a long record of compounding their earnings, or a long probable runway ahead in which to do so. As ever, investing is simple but not easy. The apt clichés are rarely followed.

• The market has always been a thing apart when I’ve worked as a journalist in Britain. It was integral when I worked in New York, and everyone can see its centrality now, as Trump fights a war according to its opening hours and mood.

• This is a market war for both sides. As Jeff Currie, an industry legend who has fast become my favoured oil analyst – there’s something about the lilt, the hair, the assured and upbeat prophesies of doom – makes clear here: Iran is explicitly coming for the $60 trillion in wealth stored in the US stock market. The Nasdaq is its war target.

You don’t think Iran gets this?… They’re telling the Americans, “We’re… going after the big prize, which is a $60 trillion US equity market.” That’s a big target, and most of the world’s wealth is sitting in that thing.

You look at the US equity market: 3 per cent, or let’s call it $2 trillion, is in energy companies. Two trillion, that’s it. The stuff that’s short oil in that US equity market is 50-plus per cent. It’s roughly $30 trillion. $2 trillion versus $30 trillion. That’s a big short. And so from a wealth perspective, it’s going to get ugly.

• Most wealth in the UK is tied up in people’s homes. More on that soon.

NB

• Here’s Kamal Kharazi, Iran’s former foreign minister, and current diplomatic adviser – reportedly involved in the mooted Pakistan talks – talking to CNN on Mar 9. Yesterday he was severely injured, and his wife killed, in an attempted Israeli assassination.

• Granular detail on the new Tehran toll booth operating in the Strait.

• Mowing the grass in Iran latest – Trump: “If we have to, we’ll come back to do spot hits.”

• Trump made a series of off-the-chain remarks, even for him, at a closed-press gathering at the White House yesterday. His team mistakenly put them online.

• Smart people continue to judge Trump as if he thinks the way they do.

• As Ben Rhodes, Obama’s former foreign policy adviser, said of Putin, it took the US a while to realise Putin was acting according to his interests, not Russia’s. This has evidently long been true of Trump. You won’t get far predicting his actions by judging US interests. Sending people to fight and die does not weigh on him. As he put it: “I don’t have the yips with respect to boots on the ground.”

• We have 2.8 more years of this. Losing control of Congress in November isn’t going to curb Trump on the international stage. If anything, he’ll be spurred to act more in the one arena where he’ll still have unchecked power.

• Pezeshkian, a “somewhat squishy reformist” with no evident power in the new Iranian state, put out a similar statement on X three weeks ago, on Mar 12: “The only way to end this war… is recognizing Iran’s legitimate rights, payment of reparations, and firm int’l guarantees against future aggression.” He’s no longer demanding reparations, but what else has changed? The war continued then.

• The stock market is closed for Easter on Friday, giving Trump a three-day window to act without market blowback.

• The US military build-up continues. A-10 aircraft – designed for close air support of ground forces – are arriving in Britain.

• So have two EA-37Bs, designed for electronic warfare, also to assist ground forces.

• What happens to oil after an attempted ground invasion of Kharg Island or one of the other smaller islands in the Strait? What happens if the Houthis attack the Saudi tankers that are currently bypassing Hormuz via the Bab al-Mandab Strait?

• Parallels are being widely made to the way Covid rippled across the world in 2020.

• A reminder of that timeline: China banned travel to and from Wuhan on Jan 23, 2020. The rest of the world was unaffected. I took a coach to Paris the weekend after that and remember looking around warily, but life soon continued. The Nasdaq didn’t peak until Feb 19: almost a month later.

• America’s premier stock market then fell 29 per cent in the following month. The FTSE – Britain’s pitiful domestic market, full of banks, miners, and no tech company worth knowing besides Rolls Royce and Airtel Africa – fell too. It was down 32 per cent by Mar 23, the day Boris locked down. Two months had passed since China shut Wuhan.

• You could get ahead of things in 2020 by paying attention to epidemiologists early. I filled up on supermarket supplies on Mar 10: prematurely enough for the size of my trolley to attract amused looks. I really should have been buying credit default swaps on high-grade corporate debt, as Bill Ackman did in a trade that made him 96x in a matter of weeks, turning $27m into $2.6bn. (This explains how.)

• Oil experts are the epidemiologists of the day. Here’s what some I follow say now:

  • “Demand destruction won’t fix this. The world cannot function with 10–15% less energy. … This has the potential to become the mother of all crises. Respect it.” (Link)

  • “When this war broke out, the oil market had some cushion built into it, namely a large amount of oil on the water. Demand was still somewhat on the lower side, given the time of year. States could draw on inventories. SPR releases could absorb some of the price impact. That cushion is gone. Now comes the pain.” (Link)

  • “The oil market did not underreact to the disruption in the Strait of Hormuz; it absorbed it. For nearly four weeks, markets have shown remarkable resilience in the face of disruption, supported by a combination of pre-war surplus, crude-on-water, and policy barrels that provided a temporary buffer and kept prices contained. That phase is now ending.” (Link)

  • “The physical market is telling you there is acute distress. And the locus of that is Asia. … It’s still a free-traded market, and you can’t have one market be in acute distress and other markets be insulated unless you have trade protectionism.” (Link)

  • “The West is yet to feel the true impact. The market remains very complacent. Safety buffers are being used up in real time: it’s all a rounding error relative to the context. This notion that the Strait opens, and oil falls [back] to $60, I think is naive.” (Link)

  • “Don’t get too caught up in the meaningless noise. As the closures of the strait and production shut-ins accumulate within that noise, just let time do its work. The fireworks in global onshore inventories are about to begin. This is a sight you’ll rarely see in a lifetime.” (Link)

NB

• Israel says it has bombed all of its military targets in Iran. Yet doing so has had no effect on Iran’s ability to fire missiles. What are they and the US achieving? (Link)

• The energy crisis will take months to unwind. It is the story of the year. Even if people are soon going to tire of it.

• Bannon calls for total war as Americana plays in the background.

• The US Secretary of War, the FT reported on Monday, tried to front-run the markets ahead of the conflict, telling his broker to buy shares in an illiquid US defence ETF. It’s down 13 per cent since the conflict began. In other words, he didn’t think the Strait of Hormuz would close and oil would spike.

In charts

Here’s how markets moved in 2020. The US stock markets are in shades of blue: the SPX is the S&P 500, America’s 500 biggest companies. The Nasdaq is the US tech index. The FTSE 100 is in white. The first dotted line is when China shut down. The markets peaked a month later (second dotted line), and bottomed on March 23 (third).

Here’s how they’ve moved so far this year. I’ve included the price of gold. Very little has happened relative to 2020 so far, as you can see:

Here’s how things look if you include the price of oil:

On other fronts

• “How can we avoid the Raskolnikovisation of our knowledge class?” (Link)