Markets:
You can’t shake the feeling that there will be at least one more development in this saga, but all signs were positive on Friday as Iran announced the reopening of the strait and Trump said an agreement would come within a day or two. This led to a $10 drop in oil prices and corresponding price action with bond yields falling 6-8 basis points late and the Nasdaq rising for the 13th straight session.
The US dollar was sold off and the Euro rose to a high of 1.1847.
It is worth noting that the US dollar’s decline did not last and was later completely reversed. Movements in stocks and bonds have moderated. This could be a sign of creeping suspicion, profit-making from a “peace trade” or something else. Very late in the day, there was a report of ship rejections in Hormuz and some doubts about Trump’s claims, including Iranian uranium leaving the country. There were also an incredible amount of leaks, to the point where it seemed more like a communication strategy than anything real.
The fear is that Iranian negotiators may not be on the same page with the IRGC, and Trump’s overzealous enthusiasm today was to see if these negotiators have the ability to dictate a deal to the hesitant IRGC. It was also reported that Netanyahu was shocked by the claim that the bombing of Lebanon would stop.
Could this whole thing be an attempt to see if there is a division in Iran? Or is this just paranoia after several recent weekends where Trump and J.D. Vance delivered big surprises? It’s hard to shake the feeling that there will be at least one more twist on this and that the risk and reward are now heavily tilted towards disappointment. Meanwhile, will Trump do all this talking only to immediately return to the attacks?
Time will tell, but the latest WSJ leak said an in-person meeting is tentatively scheduled for Monday, so that will be something to monitor, but the key will be whether ships actually continue to move through Hormuz, as some have already done.
