WTI has regained its losses of the past two sessions, jumping 4% after news of two tankers being attacked in the Gulf of Oman. This is happening on the eve of another leg down in the price of WTI and RBOB.
This is problematic for many reasons. As a major driver of equity prices, a rise in the price of oil has reversed futures fortunes — from a sharp overnight loss to a 10-pt overnight gain.
Many believe Trump is itching for a fight with Iran — the better to satisfy the neocons and earn Trump an opportunistic bump in the polls.
But, an increase in oil prices would put a serious dent in Trump’s campaign to lower interest rates. Higher oil and gas prices means higher inflation which makes it that much less likely the Fed will reduce rates any time soon.
It was one thing for Trump to threaten Iran on Twitter. It’s quite another for him to give Pompeo and Bolton free rein to retaliate for an Iranian provocation — whether real or Tonkinesque.
Stay tuned.
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