Ninety minutes before the 8pm deadline, Trump announced a two-week ceasefire with Iran — conditioned on the “COMPLETE, IMMEDIATE, and SAFE OPENING of the Strait of Hormuz.” 

An hour later, he posted an official response from Iran’s Foreign Minister.

On the Strait of Hormuz, Iran said: “For a period of two weeks, safe passage through the Strait of Hormuz will be possible via coordination with Iran’s Armed Forces and with due consideration of technical limitations.”

Again, Trump’s condition: complete, immediate, safe opening.

Iran’s acceptance: managed passage, coordinated through their military, subject to limitations that they define.

Those are not the same thing.

Nonetheless, the stock market sees “ceasefire” and rallies. Oil crashes. Bond markets calm. And we get another relief trade.

But from these two statements, nothing changes the operating reality on the ground. “Coordination with Iran’s Armed Forces” is the same permission-based travel that has been in place since March 14. “Due consideration of technical limitations” means Iran decides who passes and when.

This isn’t an open Strait.

Before the war, 135 vessels transited Hormuz daily. Last week, 16 made it through. Iran’s Foreign Minister is telling us that same arrangement continues — with “coordination.”

That won’t do much to motivate maritime insurers to resume coverage — which should keep the current 1298 cargo ships and tankers West of Hormuz (stuck).

So, this is the fifth sentiment massage since the war began. Bessent on CNBC (March 4). Supply release talk (March 9). The five-day pause (March 23). “Near the end” (March 31). And now, a ceasefire (April 7).

Each one calmed markets, produced a relief rally. Each one was short-lived. 

U.S. markets reopened today after the Easter weekend. European markets remained closed for Easter Monday.

Global markets will be fully operational tomorrow — the day of the new deadline for Iran.

With that, Trump held a press conference today at the White House, where he detailed the rescue of the downed pilots over the Easter weekend.

Hegseth (Secretary of War) framed it like this: “the pilot was shot down on Good Friday … hid in a mountain crevice through Saturday … rescued as the sun rose on Easter Sunday.”

They’ve given Iran until 8 PM Tuesday to agree to a deal, and open up the Strait of Hormuz.

On the deadline, Trump said: “After that, they’re going to have no bridges. They’re going to have no power plants. Stone ages” — every bridge and every power plant in Iran destroyed within four hours.

On oil: Asked whether the U.S. would charge tolls on the Strait of Hormuz, Trump responded: “What about us charging tolls?” So, the question of who controls the Strait is now being discussed openly from the White House podium.

On Venezuela as the template for Iran: “To the victor belong the spoils.” Trump confirmed over 100 million barrels of Venezuelan oil already refined in Houston, and said the war “paid for itself many times over.” Asked about Iran’s oil, he said: “If I had my choice …”

As we discussed last week, it’s safe to assume the plan hasn’t changed since Trump’s 1987 interview: eradicate the regime, take the oil, remove the leverage.

On NATO: He listed every ally that refused to help, saying “they’ve actually gone out of their way not to help. They didn’t even want to give us landing strips.”

Perhaps because they know what this war leads to: a day of reckoning for the current European political and economic model.

As we’ve discussed, sustained higher energy costs squeeze the budgets of more fiscally fragile countries in Europe. It’s already ramping inflation pressures, higher interest rates, higher debt service costs, and a weaker economy. And that can push the fiscally fragile countries in Europe to fiscally broken.

With that in mind, the EU’s Energy Commissioner said publicly that even a quick ceasefire won’t normalize prices “in the foreseeable future.”

And ECB Governing Council member Fabio Panetta has talked about financial stability risks, warning that energy market tensions could hit government bonds in high-debt countries.

But the Iran conflict is not the cause, it’s the accelerant.

The European energy shock exposes the structural flaws of the common currency (the euro — i.e. the lack of fiscal union), and the anti-oil policies Europe has pursued over the past decade (divesting of domestic production and exploration).

With the potential for escalation this week, the chart below is the one to watch …

The ratio of European to U.S. natural gas prices — currently at 6x.

In 2022, when Russian supply was cut, it hit a daily high of 15x.

While the ratio has doubled since the beginning of the war, the market isn’t pricing the Trump deadline (and associated threats to supply) as a serious risk.  

Below, you see the key events and major moves in this ratio over the past decade. The 6x cost of European nat gas, compared to U.S. nat gas is far from peak levels. 

We’ve had four significant relief rallies since the U.S. started its campaign against Iran.

On March 4th, just days into the war, Scott Bessent went on CNBC before markets opened to calm markets.

On March 9th, the oil market shot up 30% on a Sunday night, and by the European morning there were talks of a coordinated supply release — markets calmed. 

On March 23rd, markets again were getting hit on Sunday night, after Trump threatened to “obliterate” Iranian power plants — and again by morning things were calmed, this time by Trump’s call for a five-day pause on any energy infrastructure strikes. 

And then to open this week, markets were at vulnerable levels again, until the administration started circulating talk that the end of the war was near. 

These last three are easy to spot in the Russell 2000 chart — small caps which benefit most from oil and rate stability. 

As you can see, each of these sentiment massaging events turned the tide for the key small cap index, at around the same level. And each resulted in a relief rally three-times the average daily range of the past decade (big bounces).

But the relief was short-lived in each case. 

In this case too, likely. 

Trump gave a primetime Oval Office address tonight. UK’s Starmer gave a public address to the British people earlier in the day.  And prior to that the Aussie Prime Minister (Albanese) addressed the Australian people. 

The takeaway was contrast. 

First, energy.

Trump wanted the American people to know that the gas price shock would be brief — that “gas prices will rapidly come back down.”

And he wanted the world to know that America is energy independent — produces more oil and gas than Saudi Arabia and Russia combined, imports almost nothing through Hormuz, and is now a joint venture partner with Venezuela on the second-largest reserves on earth.

Both Starmer and Albanese (Australia) were talking subsidies and energy rationing. 

The other big contrast: timing.

Trump wasn’t using tonight to call the mission complete, but said the end of the campaign is a few weeks away.

Conversely, Starmer and Albanese were preparing their countries for a longer storm — one with lingering consequences. 

Trump was saying it’s almost over. Starmer and Albanese were saying, the hard part is just starting.

This is the energy independent/energy dependent dynamic we’ve been talking about.  

Today, markets rallied on expectations that an end to the U.S./Iran war is near.

Meanwhile, the White House posted this, from Trump, on the official account:

“All of those countries that can’t get jet fuel because of the Strait of Hormuz, like the United Kingdom, which refused to get involved in the decapitation of Iran, I have a suggestion for you: Number 1, buy from the U.S., we have plenty, and Number 2, build up some delayed courage, go to the Strait, and just TAKE IT. You’ll have to start learning how to fight for yourself, the U.S.A. won’t be there to help you anymore, just like you weren’t there for us. Iran has been, essentially, decimated. The hard part is done. Go get your own oil!“‘

In a separate post, he called out France for blocking military supply planes from flying over French territory.

“France has been VERY UNHELPFUL… The U.S.A. will REMEMBER!!!“

This, while eurozone inflation just printed a sharp rise from 1.9% to 2.5%, driven by the spike in European energy prices. And with European-bound cargo still stalled west of Hormuz.

The full energy shock has yet to arrive.

And that pain fuels the “doom loop” we’ve been discussing.

Higher energy costs in Europe squeeze the budgets of the more fiscally fragile countries.

Meanwhile, the interest rate outlook in Europe has swung from rate cuts to rate hikes by year end.

Higher rates increase debt service costs on countries like Italy (137% debt-to-GDP).

That threatens solvency, which pressures bank balance sheets, which tightens credit, which weakens the economy, which can push the fiscally fragile to the fiscally broken.

That’s where the European Central Bank (ECB) would step in, armed with a June 2022 program it conceived to keep sovereign bond markets stable — to backstop the bond markets of the fiscally fragile (to prevent a fiscally broken scenario).

But the ECB’s firepower is only as strong as its credibility — as the market’s belief in it. And that credibility will be tested if the Trump-led Fed (coming in May) doesn’t have the ECB’s back.

And as we’ve discussed, that could be the catalyst for political change in Europe — a populist shakeup, trading diluted sovereignty, slow-to-no growth and excessive regulation for pro-sovereignty, pro-growth and deregulation.

The question: Is this “catalyst” by design?

Trump is dismantling the Iranian geopolitical weapon — energy.  And in the process, he’s exposing the flawed economic, security and energy architecture of the eurozone.

And remember, the U.S. National Security Strategy document we discussed earlier this year.

It called out the European Union and “other transnational bodies” for undermining political liberty and sovereignty through migration policies, censorship, and loss of national identities and self-confidence. And it explicitly questioned whether or not they were strong enough “to remain reliable allies.”

Add to this, Marco Rubio’s speech two months ago at the Munich Security Conference.

He didn’t pull any punches.  He formalized the move from “implicit” to “conditional” support — by calling out Europe’s “foolish” policies on climate, migration, deindustrialization as anti-sovereignty and self-harming.

He reset the alliance on the basis of “reciprocity and seriousness.“

He evoked the history of “godless communist revolutions” and terminal decline of 1940s Europe.

And he said the U.S. seeks “renewal and restoration” of Western civilization.  This was an invitation to do it together — “join us.”

Otherwise, the message was, Europe is not entitled to automatic U.S. backstops (Trump’s leverage).

Why would the Trump administration want to see change in European leadership?  To counter China’s influence by restoring U.S./European alignment.

In 1987, Trump told Barbara Walters that the next time Iran threatened this country, America should go in, grab one of their big oil installations, and keep it.

In 1988, he told The Guardian he’d “do a number on Kharg Island” and take it. Over the weekend, he told the Financial Times that his “favorite thing [option] is to take the oil in Iran.”

This afternoon he reposted the 1987 Walters clip himself. Almost forty years later. 

Safe to assume, the plan hasn’t changed since 1987. Eradicate the regime. Take the oil. Remove the leverage.

If so, this doesn’t end with a peace deal.

The Trump view on Iran has a well documented four-decade history. That view: The regime has to go. Kharg Island — which handles 90% of Iran’s crude exports — has to come under American control.

And as we discussed here in my daily notes, there’s a bigger reason than Iran. 

Iran is China’s operational arm in the most strategically important energy region on earth. As long as the regime exists, Beijing has a partner that can selectively close Hormuz to Western shipping while keeping Chinese-bound oil flowing.

That’s exactly what’s happening.  As you can see below (far right of the table, highlighted) Iran’s own exports rose in March, which went almost entirely to China, according to Windward (maritime intelligence). Meanwhile, Iraq and Saudi’s exports through the Gulf plunged.

So, there is no peace deal that changes the control architecture. It takes regime removal and physical control of the oil.

That’s the Venezuela model. Capture Maduro, take the oil, install a compliant successor. Iran is the same playbook at a bigger, more meaningful geopolitical scale.

And remember, Trump has told the world “oil is going to be cheap after this.” 

Energy as a geopolitical weapon is being dismantled.

We’ve been talking about the “boom loop” in the American economy. Compute generates revenue, revenue funds more compute, compute generates more revenue.

Here’s the result of that in a chart.

This black line (going straight up) is this self-reinforcing loop at work, fueled by $650 billion of AI capex this year, $1 trillion next year, massive commitments to expand domestic energy capacity, and simultaneously, a defense industrial mobilization.

This is why the Fed is raising its growth forecast, and sees high productivity growth continuing, leading to higher incomes and higher potential growth for the economy.

Notice in that chart above, the planned capacity for the “rest of the world” (led by China) is following the U.S. trajectory.  This is the “AI race” we’ve been documenting.

And then there’s the blue line. 

Europe. It’s barely visible, at the bottom. 

This is a key ingredient in the “doom loop” we’ve been talking about for the European economy.

Europe has spent a year planning a big spend on defense, AI and energy capacity.  The question has been, how will they pay for it?

The plan: They tried to knit together support last month for fiscal union: “One Europe, One market.”

That plan may have blown up on February 28th, when the U.S. started dropping bombs on Iran. 

Twenty-six days later, Europe’s deficits in defense, AI and energy have been exposed, and now its solvency and liquidity vulnerabilities may be exposed. 

With that, European policy makers and economists were in Frankfurt today at “The ECB and Its Watchers” conference.

And the ECB’s own chief economist presented a “severe scenario” where eurozone inflation rises to almost six percent this year — and does not return to target over the next two years. Growth goes negative for 2026.

Important detail:  This “severe scenario” (which includes destruction of energy infrastructure) is particularly interesting, because it’s already happened.

The data modeling in the presentation (see it here) had a March 11th cutoff date.  That’s two weeks ago. 

There has since been a strike on the world’s largest natural gas facility, and 19 million tonnes of LNG supply has since gone offline, through at least the end of May. And in the same conference, ECB President Lagarde acknowledged this is the largest supply disruption in history.

That brings me to an interesting study today.

The ECB also published a working paper focused on the resilience of euro liquidity under financial stress. On the surface, it looks reassuring. The paper says the euro repo market remained resilient in recent periods of stress.

But from this paper (study from 2021-2025) 30% of the government bond collateral supporting that “resilience” was Italian government bonds — the bonds of the most fiscally fragile major economy in Europe, and the very bonds we’ve been flagging from the onset as most vulnerable to a solvency crisis.

This is the doom loop we’ve been discussing.

Despite the de-escalation talk of the past two days, one of the key barometers of economic pain associated with the war is showing no relief.

Remember, we looked at this chart a couple of weeks ago.

Both the red and the blue lines show the key spread between Italian yields (Europe’s most fiscally fragile major bond market) and German yields (the anchor).  This spread represents the risk premium in Europe.  

The red line is the 2022 period surrounding Russia’s invasion of Ukraine.  The blue line is the current period (18 trading days into the war).  Everything to the right of the black vertical line is the market reaction to the war catalyst.

As you can see from the blue line, the risk premium continues to rise, albeit from a low base.  But, importantly, it’s been led by Italian 10-year yields that traded over 4% the past two days.

And 4% has significance.

The European sovereign debt markets started showing stress in the summer of 2022.  And it was the sharp move above the 4% level in Italian yields that compelled the ECB to act — restarting QE (QE by a new name, the “Transmission Protection Instrument”) to stabilize bond markets of the weak euro zone countries.

This is the place we’ve been watching for the signal that the market expectations are shifting from “short-term pain” to “long-term structural economic damage.”

We’ve talked in recent days about the American “boom loop,” fueled by the self-reinforcing loop that Jensen Huang described at GTC — compute generates revenue, revenue funds more compute, compute generates more revenue.

Conversely, Europe is facing a “doom loop.”

And a catalyst to put it in motion arrived three weeks ago.  

And it’s in this chart we’ve been watching … 

The U.S. is energy dominant (a net exporter). Europe is energy dependent.

That’s why this ratio has spiked.

And it traded over 7 this morning — a doubling in three weeks. That’s Europe paying seven times what the U.S. pays for energy.

Here’s the doom loop: Higher energy costs squeeze the budgets of the more fiscally fragile countries.  And with that, market interest rates in Europe are rising, which increases debt service costs, which further squeezes the fiscally fragile countries in Europe. That threatens solvency, which pressures bank balance sheets, which tightens credit, which weakens the economy, which can push the fiscally fragile to the fiscally broken.

Why did the energy shock catalyst of this “doom loop” in Europe become more obvious to markets today?

Because an attack on Qatari LNG (a key supplier to Europe) evolved into what could be a potentially large scale supply destruction in the region (from the Trump retaliatory threat on Iranian supply).

With that potential accelerant to the EU doom loop, today, the leaders of the UK, France, Germany, Italy, the Netherlands and Japan issued a joint statement expressing “readiness to contribute” to reopening the Strait of Hormuz.

Two days ago, the President posted that NATO allies (he put allies in quotes) “don’t want to get involved” and that the U.S. “no longer needs, or desires” their assistance.

Today, those same allies offered to help.

That’s a 48-hour flip — from refusal to compliance. And it tells you everything about who has the leverage.

Now, with that in mind, lets revisit my March 10 notes, where we talked about three important meetings that happened within days of each as bombs were dropping on Iran.

Trump had top AI executives in the White House strategizing on the race to AI supremacy and formalizing an agreement to power AI. And he called defense executives to discuss the quadrupling of production of the certain high level weaponry. Then he brought together 17 leaders in the Western Hemisphere to sign a formal military alliance.

As we discussed, this was/is an industrial mobilization and the fortification of the Western Hemisphere for a bigger confrontation — bigger than Iran.

Today, the Pentagon requested a $200 billion supplemental defense budget. That’s not a “quick surgical strike” budget. That’s a multi-year industrial mobilization war chest.

This is about positioning for China. Trump was due to meet Xi in April. It was just postponed.