Market News

When the market hears bombs, it buys bonds.

Or at least that's usually the case. This time, the market is weighing whether the war in Iran is inflationary due to the 4.5% rise in oil prices so far. Notably, the gains in the oil market have been halved since the open but yields are at the highs of the day.

US 10-year yields are up 1.3 bps to 3.975% after falling below the big figure late last week. You could argue there is some profit taking ongoing on a "sell the fact" trade but it's still surprising to see yields higher.

Looking at the chart, yields are trying to bounce off the autumn lows.

The worry I have is that Iran is better-equipped to fight back than expected. There is also the semblance of a surprise strategy unfolding:

• They are…

I just finished writing up an interview with former Trump National Security Advisor John Bolton and he talked about how Trump "doesn't do strategic thinking" and his latest comments to the New York Times underscore that.

"The president offered a variety of often inconsistent visions of how a new government could take shape after the targeted killing of Ayatollah Ali Khamenei," the report says.

In one, he said the Islamic Revolutionary Guard Corps could turn over their weapons to the people. I another, he suggested a leadership change.

“What we did in Venezuela, I think, is the perfect, the perfect scenario,” he said.

The report challenges that:

he has been told by his advisers that the vast differences in cultures and history made it…

John Bolton gave a candid interview to Politico and it's worth reading carefully if you're trying to figure out what comes next for oil markets and geopolitical risk.

The former National Security Adviser praised the strikes as the "most consequential decision" of Trump's presidency, but his warnings were pointed. Bolton said he's "very worried" that the administration didn't do adequate consultation with the Iranian opposition before pulling the trigger.

Bolton walked through the mine scenario carefully and highlighted that Iran can't mine the strait if they don't have a navy, something the US appears to have already taken care of. He also acknowledged what markets are already pricing in — a temporary pause in oil flows is coming…

By now, everyone knows what's happening as the US and Israel strike Iran. Here is the state of play one hour into futures trading:

• WTI crude up $5.37 to $72.40 (about 8%)
• Gold up 2% to $5385
• The US dollar leads in FX, narrowly ahead of CHF
• AUD/USD is the biggest mover, down 60 pips (or 0.82%) to 0.7054
• Nikkei 225 opens down 1.5%
• Bitcoin flat near $66K

The latest war headline: Israeli military says it continues to carry out large-scale strikes against targets across Tehran.

I'm somewhat surprised that USD/JPY is up 65 pips to 156.68. It's creeping up on last week's high.

I think many things are trading off oil and trying to figure out if that reverberates back into inflation or fades. There is certainly going to be something of a shock at the…

Comments from Trump in a newly-released video:

• On Iran: We have hit hundreds of targets including Revolutionary Guard facilities, air defense systems and nine ships plus naval building

• On Iran: Combat operations continue

• On Iran: Military operations will continue until all of our objectives are achieved

• There will likely be more U.S. casualties

• Iranian regime armed with long range missiles and nuclear weapons would be a dire threat to every American

• U.S. will avenge the deaths of Americans

• US lawmakers see no plan for Iran following strikes

• Urge Revolutionary Guard, Iranian military and police to lay down arms and receive immunity or face certain death

• Call on Iranians to seize this moment take back your country

• To Iranians: America is with you

An…