Iran Leverages Hormuz Attacks to Force US Concessions
The Strait of Hormuz remains essentially closed to ship traffic because of Iran's attacks. Every Iranian attack is a negotiation. Iran knows it has leverage and is trying to end this war on favorable terms. Only way out is for the US to make concessions... https://t.co/sVpm56J5Xu https://t.co/hiyZqwqdFM
Iran's Strait of Hormuz Leverage Traps Trump in War
The thing with this war is that there's no easy off-ramp for Trump. Simply declaring "mission accomplished" won't cut it if Iran keeps attacking ships in the Strait of Hormuz. Iran has leverage Venezuela and others didn't have and it's...
Rising Oil Prices Boost Putin as Sanctions Ease
High oil prices are great for Putin. At $85 per barrel, Urals oil price is now the highest since 2022. High prices also mean the EU's maritime services ban in its 20th sanctions package is dead and pressure in the...
Hormuz Shutdown Spikes Brent Upside Risk Despite Parity
The Strait of Hormuz remains almost shut, even as the risk premium priced into Brent currently (blue) is on par with that after Ukraine (black). The Strait is 3 times more important for global oil supply than Russia, so risk...
Gold Surged 60% Post-Powell, Fell with War
At the end of February, gold was up 60% from Powell's dovish speech at Jackson Hole on Aug 22, which is what sparked the "debasement trade." After a massive gain like that, it's no surprise that gold fell once war...
Oil Prices Drop, Likely Stabilize at $90‑$100
I wrote this piece: "What can make the oil price fall?" on Sunday night because debate around oil had gotten far too one-sided. We've now fallen significantly and - while hostilities continue - I think we'll bounce around in a...
Supreme Court Strikes IEPPA Tariffs, Highlighting Endless Instability
The Supreme Court ruled IEPPA tariffs illegal on Feb 20. That's less than 3 weeks ago, but feels like eons. That's Trump 2.0. Nothing's ever stable. You have to wonder if we'll even remember war with Iran 3 weeks from...
Goldilocks Market Boosts EM Commodity Exporters Amid Brent Dip
We're in a goldilocks environment for EM commodity exporters like Brazil and South Africa. Brent has fallen significantly, which is good for risk appetite. But it's still 20% above where it was before hostilities. That's good for EM commodity exporters......
Skip Oil Frenzy; EM Differentiation Lifts Brazil, South Africa
Trump yesterday said war will be over soon. Oil tumbled. As I signaled over the weekend, better to steer clear of the frenzy around oil and focus on EM differentiation. That theme's only been traded for a few days and...
Oil Prices Held by Hormuz Tanker Standstill Risk Premium
The oil price isn't one of those things that spirals infinitely up. At current levels near $100, a big risk premium prices the temporary standstill of tankers in the Strait of Hormuz. You can bet Trump is working like crazy...
Strait of Hormuz Shutdown Starts Impacting Brent Prices
My chat with @SoumayaKeynes about oil on the @FT podcast. When we did this on Thursday, Brent was $83 and there was lots of humming and hawing if they can go higher. We discussed the shutdown of the Strait of...
Brazilian Real Surges, Echoing Post‑Ukraine Shock
In the last two trading days, the Brazilian Real has outperformed every other EM currency. This parallels price action after Russia invaded Ukraine. The same terms of trade shock that took $/BRL to 4.50 then is happening again now. Prime...
Markets Split Winners and Losers After Oil Spike
Today is the second day in a row (after Friday) that markets are trading winners and losers from the spike in oil prices. That's a big shift from the blanket risk-off that clobbered all EM currencies this time last week....
Hormuz Reopening Could Trigger Sharp Dollar Decline
The Dollar (blue) and rate differentials (black) are massively diverging. When the Strait of Hormuz reopens - even if only a little bit - we'll see a very large drop in the Dollar. We're still very much in a regime...
Closed Hormuz Strait Shifts Oil Risk to Reopening
The Strait of Hormuz is closed. It's not going to get more closed than it already is. All the risk is now on the other side, i.e. when and to what extent it opens. You can bet Trump is very...
Don't Chase Brent Spike; Hormuz Closure Unlikely to Worsen
Brent is $106 and markets are in full panic mode. They were slow to price the de facto closure of the Strait of Hormuz, but at this point the Strait isn't going to get any more closed. If anything, it'll...
Iranian Regime Collapse Could Drive Oil Prices Down
The Strait of Hormuz is shut. So what's a catalyst for oil prices to fall and not rise as everyone's now saying? The most obvious thing would be the collapse of Iran's regime, the odds of which are rising every...
Hormuz Closure Boosts Russian Crude to Record Highs
We already know the winner in the war with Iran and that's Russia. The closure of the Straits of Hormuz has swung Russian crude from pariah to prized commodity. Urals oil price is the highest since right after the Ukraine...
Commodity Exporters Rebound as Brent Spikes, EM Currencies Rally
Friday marked a turning point. Brent rose 9% (CO1), but - instead of a broad sell-off across EM - South Africa (ZAR), Brazil (BRL) and Chile (CLP) rallied. Markets are transitioning to rewarding commodity exporters like in 2022 after the...
Oil Hits $90, Yet Dollar Weakens—New Trend
Something really unusual happened yesterday. While oil was pushing above $90 per barrel, the Dollar fell. That's very significant because we'd normally expect to see the oil spike drive the Dollar higher. We've transitioned back into a weak Dollar world... https://t.co/2nXDj5db75...
Dollar Weakness, Not $100 Oil, Drives the Trade
In the space of one week, we've gone from everyone saying oil prices would barely move to now everyone falling over themselves predicting $100 oil. Whatever. I don't think that's where the trade is. The trade is in the Dollar,...
Japan's Debt Limits Yen Defense Amid Market Shocks
In trade-weighted terms, the Yen is lower now than mid-2024 when Japan intervened to prop it up. Japan's high public debt is a terrible weakness. When unexpected shocks come along - like war in Iran - its hands are tied...
War-Driven Oil Spikes Hint at Further Upside, Dollar Softens
In the 10 days after Russia invaded Ukraine in 2022, Brent rose 32%. We're now up 25% since the war with Iran began, which - to me - says there's more upside. Given all this, the Dollar is trading soft...
Iran Could Spark Global Oil Crisis via Hormuz
I’ve been on the bearish end of the spectrum on Iran. The Straits of Hormuz are a big chokepoint. Iran just has to blow up one oil tanker to cause a global crisis. Thanks to @SoumayaKeynes for having me on...
Risk‑off Sentiment Keeps Dollar Flat Despite Weak Payroll
If things were normal, the Dollar should be falling sharply right now. We just got a -1.9 standard deviation surprise on payrolls, which should be weighing on USD. But nothing about today is normal. We're in a massive risk-off and...
Iran's Threat to Oil Tankers Could Trigger Market Crash
Iran is getting bombed to smithereens. If oil tanker traffic through the Straits of Hormuz resumes in any meaningful fashion, Iran has every incentive to blow up a ship. All it takes is one oil tanker and global markets will...
Dollar Surge Reflects Short‑term Risk Aversion, Not Lasting Strength
The Dollar (blue) has risen sharply above rate differentials (black). That's the best indication this week's Dollar spike is about short-term risk aversion and repatriation flows. Totally short-term and doesn't invalidate Dollar weakness later this year... https://t.co/2nXDj5db75 https://t.co/EXSOCllmRB
Iran Conflict Won’t Boost Dollar as Rate Gap Narrows
Markets are pricing war with Iran as a hawkish shock for the Fed (lhs). But the US rate differential versus its G10 peers is moving against the Dollar (rhs), because central banks outside the US will also be less dovish....
Dollar Surge Is Temporary Asset Repatriation, Not Reserve Decline
This week's rise in USD confounded those who said the US is losing reserve currency status. That's NOT what it's about. Americans repatriate assets when bad shocks hit, like in 2008, 2020 or 2025. A very short-term thing. The Dollar...
Markets Wobble as Oil Spikes; US Vows Tanker Protection
For a few hours yesterday morning, markets looked very scary. Brent was going vertical, USD was rising like crazy and S&P 500 was plummeting. The US calmed things down by promising to insure and escort oil tankers, but one Iranian...
Oil Spike Threatens USD’s Medium‑Term Reserve Status
I was on @Marketplace with Kai Ryssdal yesterday to discuss fallout from the spike in oil prices for the global economy and what this means for US reserve currency status. We're getting a risk-off Dollar rally now, but medium-term this...
Sharp Dollar Rally Threatens Treasury Market Stability
The Dollar is rallying sharply. When this kind of Dollar strength happens, risk of disorderly market conditions and problems in the US Treasury market rise, because the highly leveraged basis trade can get hit as EM central banks sell their...
Brent Jumps 14% as Dollar Strengthens, Markets Shocked
The Brent oil price is now up a stunning 14% from Friday and we're starting to see disorderly strengthening in the Dollar as the global risk-off builds. Even gold is down versus the Dollar at this point. This is a...
Dollar Rally Hits All EM; Oil Ties Soon Diverge
The Dollar is rallying on risk-off price action, including against EM (black). Markets are not yet differentiating between oil exporters and oil importers, so everyone's getting hit in EM, but that'll soon give way to markets discerning between these two. https://t.co/AOkYSZgAuL...
Brent Climbs, USD Rise Temporary; Real Set to Rally
Brent has jumped to $79 per barrel from $72 on Friday. We're currently getting risk-off price action that's lifting USD, including against commodity exporters like Brazil. But that will fade and the Real will rally like it did after the...
Oil Surge Boosts
The decision tree for tonight - when markets open - follows from oil. In 2022, when Russia invaded Ukraine, oil rose 40%, which drove the Brazilian Real and other commodity exporters in Latin America a lot stronger. It weighed on...
Oil Spike Lifts Brazil Real, Sinks Turkish Lira
When markets open tonight, oil prices will spike, which will help oil exporters and hurt oil importers. In Q1 '22, oil prices spiked almost 40%. Single biggest beneficiary - by far - was Brazil's Real, which rose 20%. Turkish Lira...
Turkey's Lira Faces Pressure Amid Iran War Uncertainty
When markets open tomorrow night, they'll be hunting for winners and losers from war with Iran. Turkey is a big energy importer (red) and its trade deficit excluding gold and energy is near record levels (blue). Turkish Lira will be...
Gold +22%, Silver +31% Amid Global Chaos
The chaos doesn't stop. There's been Greenland, a yield spike in Japan, private credit ructions and AI. Now it's Iran. Easy to miss the forest for the trees and that's precious metals. Gold is up 22% this year. Silver 31%....
Low Treasury Yields Revive MMT Enthusiasm Flood
Feeling listless and disjointed as I await the inevitable barrage of "#MMT was right all along" posts now that 10-year Treasury yield has fallen below 4%... https://t.co/ANQCCAXJms
Norwegian Krone Leads Safe‑Haven Surge Amid Debt Monetization
The debasement trade is about markets searching for safe havens from debt monetization. That's driving up safe haven currencies. Norwegian Krone just took the lead (orange), while Swedish Krona (red) is in second place. Swiss Franc (black) is in third... https://t.co/hjA5jhrvvn...
Real Yields Plunge, Not Breakeven Inflation, Despite AI Hype
With all the chatter about AI disruption, I would have expected lower breakeven inflation to be driving the fall in nominal Treasury yields, since AI is a deflationary shock. But that's not what's happening at all. It's real yields that...
Gold's $5,000 Level Marks Pause, Not Sell‑Off
After the January sell-off, gold has settled above $5,000. So that sell-off wasn't a sell-off at all, it's a pause. We saw the same thing after the pull-back in October after the IMF/WB meetings. A short pause before the debasement...
Emerging Markets Resume Currency Interventions Amid Falling Dollar
The Dollar is falling steadily versus EM. Brazil and Mexico are allowing their currencies to rise, but China, Korea, Thailand, Taiwan and Chile are intervening to stop their currencies from rising against the US Dollar. EM currency manipulation is back... https://t.co/4z57KA153r...
Dollar Remains Dominant; No Viable Reserve Alternatives Yet
My @BrookingsInst blog on whether US reserve currency status is eroding. There’s no sign the fall in the Dollar is accompanied by foreign reserve managers bailing on the greenback. There simply aren’t any viable alternatives, including the Euro… https://t.co/U189pIWHJ4
Brazil's Trade Surplus Ignored, Real Remains Undervalued
No other EM has transformed itself in the past decade quite like Brazil, which has shifted its trade balance into a structural surplus. This shift has gotten no recognition in markets whatsoever. The Real remains deeply discounted compared to pre-COVID... https://t.co/1DJ37H8dXi...
Dollar Hits Post‑Election Low, Signals Ongoing Debasement
The Dollar yesterday made a new post-election low against EM (black line). Except for the tariff turmoil in Apr. '25, USD has been falling in a straight line against EM currencies. This is the best leading indicator for Dollar direction....
Turkey's January Trade Deficit Hits Near‑worst, Lira Tumbles
Turkey's trade deficit for January - out today - shows further deterioration. Chart below shows the trade deficit every January from 2000 - 2026. The 2026 number is the worst deficit except for 3 prior years (2018, 2022, 2023). This...
Brazil Real Rebounds to 4.50 as Dollar Weakens
After Russia's invasion of Ukraine in 2022, Brazil's Real went from $/BRL 6.00 to 4.50 in a few months as rising commodity prices lifted the terms of trade. Now the Real is gaining along with most other EMs as Dollar...
EM Currencies Surge, Yet Turkish Lira Slides Amid High Carry
Most EM currencies are managing to rally strongly against the Dollar so far in 2026. Turkish Lira is falling and the worst performer. This despite annual carry of over 30%. The fact that Lira is still falling is a sign...