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Hey everyone,
I've been following Middle East news and I can see that Iran is willing to do whatever it takes to break the US economically by sending energy prices through the roof. Last night, they attacked Qatar's main gas refinery, which exports massively to Europe and Asia. Asia is already experiencing significant shortage situations (China excluded). Japan rushed to Trump to ask for LNG (which is extremely expensive).
On the other side, Trump seems lost, he contradicts himself constantly, his statements are all over the place. We don't even know where this is heading. You even have to wonder if he's still the one calling the shots. We know Trump doesn't hesitate to backtrack when financial markets take a serious hit. But it seems like this time, he can't even negotiate a way out. The idea is almost certainly that Israel, with its highly influential lobby in the US, is simply forcing Trump not to back down. Trump had already demanded that Israel not attack energy infrastructure, and they've done it multiple times anyway, including yesterday, by striking the shared infrastructure between Iran and Qatar.
And despite all this mess, oil is still under $120 a barrel. Yes, that's already huge, but it's nothing compared to the reality of the situation, where we're no longer talking about ships stuck in transit, but complex infrastructure being destroyed.
Yesterday, we learned that production costs surged in February, far above estimates. And now we'll have to factor in this energy price spike, gas has doubled or more. At the last FOMC, the conversation was about "how many rate cuts", but imagine inflation coming back at 4% or higher by April if nothing changes. At what point do you start raising rates again? Ah, but then there's growth to worry about... It's striking that everyone says growth is going to collapse in 2026, leading to stagflation, yet Powell, who admits he has no idea what the impact of $100 oil on inflation would be, still claims GDP will hit 2.4% this year and be even higher in the years ahead, and that AI will boost productivity, bringing costs and therefore inflation down.
The situation is far worse than the war in Ukraine. The Western world keeps up its propaganda, saying "Iran needs to stop, this is wrong", while it's the US and Israel who are wrecking everything. Meanwhile, we're already seeing the first price hikes: plane tickets up €50 to €100 depending on the route, industries significantly raising their prices (around 30%).
And obviously, don't count on China and Russia, who are profiting from this context. Only India, which has become very pro-US since Trump's election, seems willing to leverage its influence. But beyond that, Trump is asking for $200 billion to keep his war going (with the national debt hitting a new record), Israel is striking civilian infrastructure, and Iran is trying to break them through an economic crisis.
Despite all this chaos, US indices barely move. They drop 1% only to claw it back the next day in a fit of euphoria because oil dipped 2% and some bogus rumor made the rounds.
As for me, I've sold a large chunk of my stocks and ETFs. Why? Not because I'm getting cold feet, but because I no longer understand what I've put my money into. Yesterday, despite all the news, my photonics stocks gained between 5% and 10%. Great, but it makes absolutely no sense, it follows no logic whatsoever. Which means it can go a lot higher or crash hard, because there's no rational foundation to it.
And tomorrow is Friday, retail investors will dump their weekly paychecks into stocks, the algorithms will follow the move, and off we go...