Wildest day for oil ever

Katie Martin (0:06)

Pushkin. So, is the US conflict with Iran over? I'm not just trying to be a smartass here, I genuinely don't know. Earlier this week, Donald Trump said the conflict was, and I quote, very complete, pretty much, while his Secretary of Defense, Pete Hegseth, outlined a plan for the next phase of the bombardment. An enterprising reporter somewhere asked Trump to explain, which it was, very complete or still underway, the answer? You could say both. Confused? Well, welcome to the club. But investors seem pretty sure they've spotted a taco. T-A-C-O, you guys. Trump always chickens out. Oil prices have dropped back and stocks are picking up. Today on the show, what do investors really make of this war, and what is our best guess of what happens next in the markets? This is Unhedged, the Markets and Finance podcast from the Financial Times, and Pushkin. I'm Katie Martin, a markets columnist at FT HQ in old London town, and I'm joined all the way from the Big Apple, New York City by his excellency, the very reverend Robert Armstrong of the Unhedged Newsletter. Rob, like seriously, what is going on?

Robert Armstrong (1:24)

Congregants at Our Lady of Eternal Liquidity, peace be with you. And it's really hard to say, what markets are responding to is not anything about the world outside of Donald Trump's head. They're purely responding to the fact that what he signals very strongly yesterday with those comments was he is-

Katie Martin (1:45)

The yesterday being Monday.

Robert Armstrong (1:46)

Oh, I'm sorry. Monday with those comments was he's looking for the exit. He's had his fun, he's dropped his bombs, and now he's looking to talk about, think about, do other things.

That doesn't mean anything has changed on the ground necessarily, but the markets were anticipating, and now they have received confirmation that in the president's eyes, he wants this thing to be over. And that's a meaningful fact, even if the facts on the ground, war-wise, haven't necessarily changed between last week and this week. So, you know, you use the phrase taco. I'm hesitant to use that here, not only because it's kind of a joke and this is a war, but also using that term creates the impression that Trump can just close the door on this thing. And I don't think this is that kind of a situation. There are other people involved, to say the least. So, the Iranians might have a couple of words to say about whether this war is over. So might the Israelis. So, that's something that, this is not Liberation Day, Trump's tariff announcements in April, where when he chickens out, they are over, right? He is in charge of that. In a way, he is not in charge of this war.

Katie Martin (3:08)

Yeah, so everyone's talking about this in terms of it being like a taco thing. As you say, that might not be right for a number of reasons. But one thing that we do know is that we know what we don't know. And so we're not gonna get into the geopolitics because we've got much, much cleverer colleagues who have got a better read on all of that stuff. But we do know that even ahead of this move by Trump to back away, I think we're safe to call it that, markets like never really took this that seriously in the first place, right? They always thought he would back away at some point because we had some big moves in markets, like the oil price obviously shot higher. But it was never like, panic stations.

Robert Armstrong (3:55)

Well, let's talk about the oil price first. I mean, I think we did see a big move up in oil. Probably not coincidentally, that was the night before Trump made his comments. So if you wanted to build out a narrative around Trump, realizing he'd gotten in over into the deep end of the pool and was paddling furiously towards the shallow end, you would say he saw oil get into the danger zone, both economically and in terms of the gas price, therefore electrically and so forth. And he decided he needed to turn things down.

Katie Martin (4:33)

Let's talk a little bit about gasoline prices actually in the States. So they went up 16% in a week. If you're wondering, listeners, that's a lot. So that gets you to pretty much $3.50 a gallon. You guys are like weirdly focused on petrol prices, aren't you?

Robert Armstrong (4:52)

It's true. We do drive a lot here. Certain voters are very exposed to the gasoline price. Agriculture people are very exposed to the gasoline price. Obviously people commute a long way, which is a lot of Americans, a lot of suburban Americans commute a long way. And sustained $100 plus oil, you would have seen a much bigger than 16% move up.