With the recent drop in odds for Strait of Hormuz re-opening, time to examine how credible Mr. Trump’s remarks are being taken. To me, with odds back to below pre-cease fire rates, it seems to me punters should be a little less credulous, In other words, given Mr. Trump’s penchant for overstatement, why do we see these gyrations?
Source: Kalshi, accessed 4/18/2026 10:30AM CT.
Not sure this exaind Kalshi pricing but, what with the cease-fire in the Gulf fraying, the rest of the world is attempting to resolve the war in the Persian Gulf without relying on the U.S. to come up with a plan. A coalition of countries which includes neither the U.S. nor Israel is working on a plan to secure shipping through the Strait of Hormuz:
https://www.yahoo.com/news/articles/england-france-lead-strictly-defensive-200131760.html
The plan is pointedly “strictly defensive”, which I take to mean no blockades of Iranian ports, no bombing and certainly no killing of Iranian civilians – maybo no attacks on Lebanon. The “strictly defensive” part also explains the absence of the U.S. and Israel.
Meanwhile, Pakistan is working with China, Egypt, Turkey and Saudi Arabia on alternatives to the U.S.-vs-Iran negotiations, because the clear need by both the U.S. and Iran to score a win is not working for anybody else:
https://www.nationalheraldindia.com/international/china-and-pakistan-propose-five-point-plan-to-de-escalate-west-asia-tensions
https://www.yahoo.com/news/articles/egypt-working-pakistan-lasting-us-091236237.html
The world has lost confidence in U.S. leadership, and is finding ways to go around us. Big surprise. The way I can imagine this working is that the France/UK-led coalition and the Pakistan-led coalition present the U.S. with a workable plan (plans?) to stabilize oil trade, and then pressure us to accept it. We (the war-criminal-in-chief) won’t be happy, but such a plan would offer a way out, so we (he) might accept it. Bibi won’t like it. It’ll be our job to make him accept it. Iran has made clear that an end to Israel’s attacks on Lebanon is a condition for opening Hormuz, and the two coalitions will happily go along with that. They may grudgingly go along with Iran collecting tolls on oil and gas shipments, perhaps with time limits; Iran needs money to repair damage done during the war.
I will say, the contrast between the rest of the world’s reaction to Israel’s war crimes in Gaza and it’s reaction to Israel’s war crimes in Lebanon is instructive. Lebanon is linked to Iran and Iran is linked to oil, so the rest of the world is actually trying to take action that will end the violence against Lebanon. Gaza has no such link to oil, and mostly the world just talked. Truly sad.
And while we’re all moaning about oil prices, Israel is back to committing crimes in Gaza.
“mostly the world just talked.”
They’re still “just talking”, I don’t see a scenario where they open the strait or stop the bombing without US support.
25th Amendment Trump, now.
Trump statements on Hormuz/Iran deal on Friday were delusional.
Cease fire ends Tuesday!
What the Iranian FM posted on X was the toll IRGC, control of Hormuz from the soon to be defunct cease fire. Israel agreed to stop bombing civilian targets in Lebanon.
Iran closed Hormuz yesterday, US blockade broke the deal.
Everyone with inside information shorted crude futures Friday AM.
Should probably short S&P tomorrow AM.
Trump is a clear danger to civilization.
Good if you have an hour lead on his tweets.
Trump has lost all control of this situation and it’s crazy for any market to pretend that he can do anything to steer events going forward. Iran holds the cards and they’ll play them to further humiliate Trump and demonstrate their power over the world economy—which will play into negotiations against Israel. I also don’t think that Trump has the intelligence or the guts to stand up to Bibi. The sensible course of action that Macroduck outlines in his post probably won’t be taken until China steps into the room.
Pakistan agrees with you about China.
Kinda think Pakistan is making a bigger place for itself in the world.
Here’s an interesting tidbit at the intersection of the Iran war and the role of the dollar in trade:
https://cointelegraph.com/news/iran-btc-strategic-usdt-dominate-oil-tolls
Iran allows payment for its oil in yuan, stale coins and bitcoin. So far there is no evidence that bitcoin has been used. Most transactions are in dollar-linked stable coins, rather than yuan.
So while China made the effort to turn the war into a boost for the yuan’s international role and while Iran is open to a handful of different payment types, the market reality is that trade is sticking close to dollars when actual dollar payments aren’t workable.
The head of the International Energy Agency, Fatih Birol, estimates that getting Persian Gulf oil and gas production back to normal may take two years:
https://oilprice.com/Latest-Energy-News/World-News/IEA-Chief-Says-Oil-Gas-Recovery-Could-Take-Two-Years-After-War-Damage.html
The reporter at Oilprice.com chips in with “markets are still treating the disruption as temporary.” Given where she’s publishing, it’s a little troubling that she gets this so wrong. The December 2029 WTI contract is trading about $5 higher than just before the war. The December 2028 contract is about $6.50 higher. December 2027 WTI is about $8 higher. The whole “markets are dumb” thing has become conventional wisdom during the closure of Hormuz, to the extent that it’s now repeated when the evidence clearly says otherwise. Futures are pricing in a gradual return to normalcy, over a few years. That’s right in line with what Fatih Birol is saying.
By the way, a two-year supply disruption, give or take, means not only elevated fossil fuel priced. It also means that economic data will contain an echo of the war long after the war ends, just as was the case with Covid and the housing slump and government shutdowns. Good for grad students looking for dissertation material, bad for work-a-day economic analysis.
Iran and their officials, much like the US and their officials have plenty of money and it seems both are playing markets; hence pumping during the week followed by a dumping into the weekend; to be followed by a crushing of the shorts on Monday. Both are in agreement that there is plenty of money to be made with inside information. The “war” is a profit machine!
The rest of us mere mortals stand in awe of the profits to be made in the futures markets.
When no bankers paid a price for their recklessness during the housing boom, the message was clear.
Trump today: “Iran recently announced they are closing the Strait, which is strange because our BLOCKADE has already closed it. They are helping us without knowing.”
See, that’s how you turn around a humiliating setback into a declaration of victory. Trump tricked Iran into doing exactly what he wanted!
I think if Prof Chinn knocked on the door of one of his Madison Behavioral Economics colleagues’ door he might find the closest thing to an “answer” to his query.