The Fed & Oil
My view is that the price of oil looms much larger as an economic backdrop than Fed Funds in the near-term. If the U.S. and Iran have 60 days to negotiate post Friday, Iran then has every incentive to squeeze every last concession from the U.S.
Just look at the deal calendar that Iran set (not the U.S.) The deal calendar is 60 days, meaning the world’s oil reserves will have bottomed by the end of 60 days. I understand that the Strait technically will be open this Friday if Israel does not incite violence, but oil flow through the Strait won’t be humming at pre-War levels most likely ever. The analysis I’ve read from different parties suggests oil flow will be at 25-40% of pre-War capacity steady state and it may take a year to get there.
Iran has a ton of leverage and they would be foolish to not exercise every ounce of negotiating leverage.
The punchline is the price of oil is not going to “drop like a rock” as Trump says. There is a very real risk the price of oil will set new highs this summer.