While Iran claims that the United States is negotiating with itself, Donald Trump calls them productive and postpones bombing the enemy’s energy infrastructure for 10 days. The owner of the White House uses his well-known tactics of threats followed by retreat. She worked well in trade wars, but the Middle East is a delicate matter.
The return of Brent above $100 per barrel, the Nasdaq Composite’s move into correction territory and the strengthening of the US dollar indicate that the American president has hit a wall. Markets are in no hurry to apply TACO or Trump always backs down, as they do not know how long the conflict will last. According to 54% of investors participating in the Deutsche Bank survey, it will not end before the end of April. 42% of respondents believe that the full operation of the Strait of Hormuz will not be resumed until the end of May. However, 55% do not see Brent rising above $130 per barrel.
This is quite unusual, because the current oil crisis is the largest in history. Despite the fact that Saudi Arabia has managed to find workarounds, the total supply loss is about 10 million bpd. We are talking about record supply disruptions. The situation is aggravated by the fact that the Persian Gulf countries are unable to increase their spare production capacity.
Due to the conflict in the Middle East, the OECD decided not to raise its global GDP forecast from 2.9% to 3.2%. The Paris-based organization warns that prolonging the war in Iran will slow down the global economy by up to 2.6%. The inflation estimate for the 20 largest countries was raised from 2.8% to 4%. There is a stagflationary scenario in which the US dollar feels like a fish in water.
According to Goldman Sachs and Morgan Stanley, the greenback will weaken when investors start to worry more about the recession. They say that in such circumstances, the Fed will resume talks about lowering the federal funds rate. The OECD is in a hurry to calm the “bears” on EURUSD. The Paris-based organization raised its forecast for US GDP for 2026 from 1.7% to 2% and lowered it for the eurozone from 1.2% to 0.8%. The recession will come to Europe faster than to the United States. So the ECB will have to cut rates.
On the contrary, an increase in the estimate of US inflation by 1.2 percentage points indicates that the markets underestimate the chances of a Fed rate hike in 2026. They make up 45%.
