The market isn’t pricing in true risk of Iranian blunder because it believes Trump is rational
Markets are still acting like the Iran crisis is temporary. But if the Strait of Hormuz disruption deepens, the Iranian oil crisis could trigger inflation, fuel shortages and a global recession.
The disconnect between the markets and what is actually happening in the Strait has become a yawning chasm.
Here’s what the stock market might have gotten wrong about the Iran war
The surge in optimism contrasts starkly with continued energy supply challenges that threaten long-lasting economic harm — and a market reckoning.
As stocks soared last week and oil prices dropped amid an apparent cooling of tensions between the United States and Iran, it may have left the impression that the energy shock that rattled the world would quickly fade, with the risk of sending the global economy into recession.
The optimism may have been short-lived. On Saturday, Iran’s military announced it would reimpose restrictions on the Strait of Hormuz, throwing the critical waterway’s status into doubt.
The uncertainty highlights that beneath that surface, a starkly different reality is unfolding. It is defined by disrupted supply lines and damaged infrastructure, sparking increased concern among the people who produce, transport and depend on energy.
“The people closest to the industry are far more concerned about these disruptions and recognise the length of time it will take for things to return to normal – if they ever do,” said Gerry Morton, oil and gas co-chair at the law firm Baker Botts. “The further away you get from actually being involved in producing oil, the less you seem to be concerned about the physical reality and problems that are there.”
The Washington Post
The Iranian oil crisis risk is the one scenario markets refuse to seriously price in. As tensions escalate around the Strait of Hormuz, the gap between reality and market optimism is becoming dangerously wide.
Markets are betting on a fantasy
The optimism of the markets that war with Iran will end and everyone can go back to making money is deeply flawed.
The market is making the assumption that Trump is rational, when all evidence points to him not being rational!
This entire misadventure is an obscene geopolitical blunder that will permanently set inflation higher globally and will drive the entire economy into recession.
A needless, stupid, counter-productive recession.
Hoping that Trump becomes rational is like thoughts and prayers at another school mass shooting.
No one wants to price in an Iranian disaster
There is a deeper issue behind the vacant optimism, the reality is no one wants to actually price in an Iranian disaster.
The ramifications of what Trump and Israel have foolishly embarked upon is not just a canary in a mine, it’s a flock of Black Swans in a minefield!
The destabilisation from fuel shutdowns is disastrous and can’t just bounce back!
The market doesn’t want to consider those real costs and cling to the hope that rational actors will prevail when that is the most optimistic take because Trump is not rational and Netanyahu is manipulating that.
To paraphrase 90’s megaband, Destiny’s Child, “I do not believe you are ready for this Jelly”.
I have been planting as many vegies as I can including potatoes broad beans basicas spinach etc Including a hot house with tomatoes capsicums egg plants .Here in Taranak two of our roads north are out of action because of climate events .I suggest grow as much food as you possible to prepare for food shortages or hyper inflated food prices in supermarkets because of the high price of deasil to transport produce
This critical situation – monumental “market blunder”, never needed to become so out of control. It clearly shows us those who are brain-dead. Trump is not and never will be RATIONAL. He is a bullying, narcissistic despot, so stuffed up with his own self-importance. Our pompous ‘similar’ Luxon is not interested in anything from the ‘too hard basket’, simply tinkering around the edges trying to look busy!!!! Please world leaders start acting like you actually care about your countries and people, not just yourselves and your money/power/egos. If you can’t do this then RESIGN NOW! This unnecessary, sad saga still has a long way to go.
If it looks bad now, just wait until the Red Sea routes are also blocked off. Then we will be truly buggered.
Fanks to Trump and Netanyahu. Screw those stupid, selfish losers.