We’ve been hammering the same point ever since Trump first bombed Iran: rather than shrink from the conflict, Iran would exact as much retribution as possible. Since their military isn’t of the same caliber, they would use their strategic position as gatekeeper to the world’s oil supply to hit Trump where it hurts: oil prices and inflation.

While the Fed and the Treasury have done a pretty decent job at times of keeping a lid on oil prices, WTI has broken out of the flag pattern we identified several month ago. It has also completed an inverted H&S pattern. Both suggest much higher prices that will test or best the March highs – presumably around the time of the November midterms.

Note also that the 10Y has nearly reached our next upside target at 4.84% – only slightly below 20 year highs.

Suffice it to say things are about to get very interesting in the markets.