•Meanwhile in markets, President Trump’s latest brainfart – retreating from the war and leaving the Iranians in full control of the Strait of Hormuz – has provided only a modest boost to sentiment. That’s Trump’s unpredictability and general unreliability working against him. Markets have learned to doubt his words, or rumors of his plans, which can change by the day;

•According to an anonymous sources based report in the Wall Street Journal, Trump has told his aides that he’s willing to end the campaign within the original target four to six week timeframe even if there’s plenty of unfinished business: from regime change, reopening the Strait of Hormuz, the nuclear material, and too many other things to list here. So, cut and run;

•The report in the Journal stands in stark contrast with Trump’s remarks yesterday, when he threatened to raze Iran’s infrastructure, including its desalination plants (though he did tout his typical ‘we’re gonna make a deal’ talk). Furthermore, Trump has marshalled an additional 10,000 troops in the region;

•Meanwhile, the Iranians aren’t sitting still either. According to reports, an Iranian drone hit a fully laden Kuwaiti oil tanker of the coast of Dubai earlier in the morning. The folks at Bloomberg call it the most significant attack on a merchant vessel since the outbreak of the war more than a month ago;

•On a final note, the Financial Times ran a story that US Defense Secretary Hegseth’s broker tried but failed to buy defense stocks just before the outbreak of the war in what would have been a textbook case of insider trading. That’s the sort of stuff you see before someone’s fall from grace. Now, Hegseth is the war hawk in the administration, complete with these annoying Wolf Warrior acts before the press. If Trump does want to cut and run, best to blame it all on Hegseth and then get rid of him (though I can’t recall an instance where Trump tried to scapegoat on of his loyal henchmen to save himself. But I stand to be corrected);

•Bottom line, my original armchair geopolitical expert forecast was for a short war lasting weeks or a few months. With the quagmire having metastasized, I am not so sure anymore about that call;

•Turning to some market commentary, the Wall Street Journal story on the Trump TACO has provided only partial relief. Relief is most visible in UST yields, which are lower for the day and – depending on the tenor – about 15-20bps below last week’s highs. S&P 500 futures have recouped yesterday’s losses though Asian equities are mostly lower this morning. Brent crude isn’t really buying the TACO. Yes, at just shy of $113 a barrel prices are a couple of bucks below yesterday’s high. But we’ve seen much stronger declines in oil prices from earlier relief rallies;

•The broad dollar is a tad lower this morning, but the losses are pretty much insignificant. Pricing of a 25bps hike at the April ECB meeting is sagging, one bp at a time. At pixel time the ESTR for the April ECB was at 2.06. Meaning that we’re now closer to a hold than a hike;

•Looking ahead, we have plenty of ECB-speakers on tap, who now have the luxury of holding or raising rates next month as per ESTR pricing (central bankers lover their discretion). We also get US job openings, Eurozone CPI, plus some Fed-speakers. It remains to be seen if these normal day-to-day events are once again overshadowed by the war.

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