The IRGC may have thought it was making a bold move and doing a little geopolitical flexing with its attack on the UAE. It is quite likely this attack will prove to be an epic blunder.

Tonight the ceasefire is holding. Tonight, the IRGC is still in charge in Tehran.

How long either of those statements remains true is anyone’s guess.

Against all odds, the ceasefire is technically still in effect, although both sides are making an increasing number of attacks on the other.

Last Friday, the US disabled two ships attempting to run the blockade on Iranian shipping.

Previously, Iran fired missiles at US “enemy units” as they sought to intercept another ship trying to run the blockade.

Iran is also reported to have launched additional missile and drone attacks on the United Arab Emirates, a curious escalation by the IRGC in a conflict already fraught with regional and global tensions.

Meanwhile, both the US and Iran claim to be winning the war, an Iran in particular is demanding other nations acknowledge it as a regional superpower.

Most of the week has been spent waiting to see if Iran would formally respond to US peace proposals. Today Iran officially responded.

In light of the IRGC’s recent demands, we are on safe ground summarizing the Iranian response as an emphatic “no.”

While the escalations themselves have largely yet to happen, it is highly likely that the next phase of this war with Iran will be more actual war—more bombings, more drone strikes, and more destruction.

Iranian intransigence on their illicit nuclear weapons program and illegal seizure of the Strait of Hormuz are foreclosing all other options. At present, there is no realistic alternative on the table for dealing with Iran’s multiple threats to the world except by war.

The Peace Deal

At the start of last week, a curious lull had developed in the war with Iran. The ceasefire was (mostly) holding, although there had been no peace breakthroughs or signs that negotiations would resume.

That lull ended on May 4, when Iran struck the United Arab Emirates oil terminal and refinery at Fujairah, outside the Strait of Hormuz.

The UAE’s defense ministry said three cruise missiles coming from Iran were intercepted and a third fell into the sea, and told its citizens the loud booms heard inside the country were the result of those aerial interceptions.

As I observed in my last article, Iran might have revealed more about its strategic objectives than it intended with that strike. Fujairah is one of the few Persian Gulf oil terminals outside the Strait of Hormuz.

Even as Iran continues to push its claim of right to control traffic through the Strait—a claim which is completely rejected by the UN Convention on the Law of the Sea (UNCLOS)—Iran is separately attacking the infrastructures which Arab States might use to bypass the Strait and thus negate Iran’s diplomatic leverage of being able to deny Arab states in the Gulf the capacity to export their oil and natural gas.

If that is Iran’s intent, then the strikes on Fujairah are an unmistakable act of war. They are an aggressive demonstration of Iran on offense, not defense. That is not something that other Arab states, particularly Saudi Arabia, will have failed to notice.

It was against this backdrop that United States negotiators issued a “fourteen point memorandum” proposal, one that was less a proposal for peace than a proposal on how to negotiate a peace.

The document reportedly functions less as a full peace treaty and more as a temporary stabilisation mechanism. Under the current proposal, Iran would agree to suspend uranium enrichment activity for a prolonged period — reportedly somewhere between 12 and 15 years — while the United States would gradually ease sanctions and release billions of dollars in frozen Iranian funds.

The fundamental premise of the memorandum was that Iran and the US would stop shooting at each other or at neutral third parties, the Strait of Hormuz would be reopened with unfettered rights of transit passage for all nations recognized, and, most crucially, Iran would surrender its illicit nuclear weapons program.

At the heart of the memo lies the question that has shaped US-Iran tensions for decades: uranium enrichment. According to Axios, the United States wants Iran to commit formally to:

• suspending enrichment activities,

• abandoning any nuclear weapons ambition,

• shutting down underground nuclear facilities,

• and accepting expanded inspection powers, including snap inspections by UN monitors.

One particularly sensitive clause reportedly under discussion would require Iran to transfer its stockpile of highly enriched uranium outside the country — something Tehran has resisted repeatedly in past negotiations.

The nuclear weapons program has been the sticking point between the US and IRGC-dominated Khamenei Regime. The IRGC will not entertain any discussions that involve Iran surrendering its illicit nuclear weapons program—and yet that is the key topic in every discussion with Iran.

The US has acknowledged Iran could pursue a legitimate civilian use enrichment program, which would cap the degree of enrichment below 5%—well out of the range of any peaceful procet.

Secretary of State Marco Rubio told reporters Tuesday that if Tehran wants a “civilian nuclear program,” then it is free to pursue one.

“They could have that if that’s what they wanted, but they’re not acting like that’s what they wanted,” Rubio said in the White House briefing room. “They’re acting like they want a military nuclear program. That’s unacceptable.”

Under the memorandum of understanding, Iran would also agree to inspections by the United Nations on its nuclear program, while the U.S. would gradually lift sanctions and release billions in frozen Iranian funds, according to Axios.

President Trump has been clear and consistent on this point throughout the war with Iran: Iran cannot be allowed to possess nuclear weapons.

For its part, the IRGC refuses to concede that it will be blocked from doing whatever it wants involving weapons grade uranium and plutonium.

Please Support Independent Journalism

Iran’s Response

Officially, Iran has spent the past several days “reviewing” the US proposal, before rendering an official response. At the time, President Trump oscillated between pessimism and his reflexive optimism on the prospects the IRGC-led regime would accept the proposal.

An Iranian foreign ministry spokesperson cited ​by Iran’s ISNA news agency said Tehran would convey its response. U.S. President Donald Trump said he believed Iran wanted an agreement.

“They want to make a deal. We’ve had very good talks over the last 24 hours, and ‌it’s very possible that we’ll make a deal,” Trump told ‌reporters in the Oval Office on Wednesday.

Earlier in the day, Trump had sounded more pessimistic about the chances of a deal. In a Truth Social post, he threatened to restart the U.S. bombing campaign in Iran, calling ⁠the possibility of Tehran agreeing ⁠to the latest U.S. proposal a “big assumption.”

At the same time, Iranian media released several news items which called into question the key element of any peace proposal—Iran relinquishing its illicit control over the Strait of Hormuz.

While the regime was technically “reviewing” the proposal, the IRGC-linked Tasnim news agency published an article regarding Iran asserting control over the undersea data cables running through the Strait.

Tasnim, in an article titled “Three practical steps for generating revenue from Strait of Hormuz internet cables,” wrote that submarine fiber-optic cables passing through the strait carry more than $10 trillion in financial transactions each day, but said Iran has been deprived of the economic and sovereign benefits of this critical communications infrastructure because of what it called a traditional view of the strait.

The outlet said the Islamic Republic should take three steps: charge foreign companies initial licensing and annual renewal fees; require major technology companies such as Meta, Amazon and Microsoft to operate under Iranian law; and give Iranian companies exclusive control over maintenance and repair of the cables.

Tasnim said the measures would turn the Strait of Hormuz into a “strategic center for legitimate wealth creation.”

Fars, another IRGC-linked outlet, published a similar thread on X, describing Iran as the ruler of a “hidden highway” in Hormuz.

This proposal was and is nothing more than a mafia-like “protection” racket. It is blatant extortion, a point I noted when the article was released.

Folks from New York or Chicago will recognize the “protection” racket the IRGC is intimating (“that’s a useful data cable you have there. Be a shame if something happened to it.”)

Suddenly, the IRGC has decided that the Strait of Hormuz is sovereign Iranian territory, from the seabed on up.

We should note that the UN Convention on the Law of the Sea, which Iran has signed but not ratified, completely refutes Iran’s claims on the Strait. The Strait of Hormuz is and has always been a recognized international waterway, through which there is an unfettered right of transit passage per UNCLOS. As a Strait, under UNCLOS there is an unfettered right of transit passage per Article 38. Under UNCLOS, no states bordering a strait may interfere with the right of transit passage under Article 44.

Article 51 further refutes the notion that Iran has any claim to make on undersea cables.

However, international law and UN treaty obligations are not proving any obstacle for the IRGC regime, which is simply doubling down on bellicose rhetoric every time the Strait is mentioned.

With no breakthrough in sight, Iranian authorities continue to signal an elevated status in their doctrine for the strategic strait, perhaps rivalling the contentious nuclear programme for which the country has been sanctioned and isolated for decades.

The theocratic and military establishment in Iran has “neglected the blessing” of the strait for years, said Mohamad Mohkber, a senior adviser to slain Supreme Leader Ayatollah Ali Khamenei, and first vice president under late Ebrahim Raisi.

“In reality, it is a capability on the level of an atomic bomb, because when you have a capability that can affect the entire global economy with a single decision, that is an enormous capability,” he told state-linked Mehr news agency on Friday.

Following through on that rhetoric, even before the regime had officially sent a response, it made public statements that the Strait of Hormuz would remain entirely under Iranian control no matter what.

At that point, it was an open question if there was anything left in the proposal to which Iran had not already responded.

Earlier today, Iran finally submitted a written response to the US proposal, laying down several demands of its own.

According to diplomatic and Iranian sources cited by Arabic-language media, Tehran’s response places a ceasefire in Lebanon and the lifting of restrictions on Iranian oil exports at the center of any future understanding with Washington.

A diplomatic source speaking to Hezbollah-affiliated Al Mayadeen said the Iranian proposal calls for an end to what Tehran describes as the “siege” on the country and demands unrestricted Iranian oil exports. The source added that a ceasefire in Lebanon is considered one of Iran’s “red lines” in the negotiations.

In sum, Iran’s demands for a peace talks to begin was that the US acknowledge that the war was over, that the blockade of Iranian shipping was lifted, and that all US sanctions on Iran were terminated. All this while Iran kept control over the Strait of Hormuz, which it had already publicly stated it had no plans to ever surrender.

President Trump’s reaction to the Iranian response was not delayed at all, nor was it lengthy. Posting to Truth Social, President Trump pronounced the response “unacceptable.”

Thus ends the latest diplomatic effort to resolve and end this war.

Please Support Independent Journalism

Meanwhile, Provocations Mounted On Both Sides

While Iran “reviewed” the proposal, questions arose whether the ceasefire was still in effect, as there were reports of strikes coming from both sides:

• In what US Central Command (CENTCOM) identified as blockade enforcement, US naval forces disabled the M/T Sea Star III and the M/T Sevda on May 8.

• Separately, Iranian forces fired on a Chinese cargo vessel near the United Arab Emirates port of Al Jeer. Iran’s choice of targets was nothing if not ironic, given their reliance on Chinese economic assistance—nothing says “Help me, please!” so much like trying to blow up your financial patron’s boat.

  

• Shortly after the attack on the Chinese vessel, Iran reported that a commercial pier near Bandar Abbas had been attacked.

  

• In a separate incident, the US Navy sent three destroyers through the Strait. While Iranian forces fired on them, the ships responded in kind and very successfully, according to President Trump posting on Truth Social:

  

While the ceasefire was “technically” still in effect, outside observers might be forgiven for thinking that it had broken down, and that hostilities were ramping up once more.

Please Support Independent Journalism

More War?

With the Iranian response labeled completely unacceptable by President Trump, and there having already been an escalating sequence of tit-for-tat provocations between the US and Iran, the answer to the inevitable question “what next?” appears to have already been answered: there will be more war.

Within some analyses, that there would be more war has been largely inevitable. Even as Majlis Speaker Mohammed Bagher Ghalibaf has sought to thread the diplomatic needle between preserving the regime’s objectives and negotiating and end to the conflict, he is seen as being opposed—and largely blocked—by IRGC commander Ahmed Vahidi.

Yet he faces stiff opposition. “There’s a power struggle within the irgc,” says another Iran-watcher. The speaker’s most fearsome opponent is Ahmad Vahidi. A career soldier, former defence minister and the current head of the IRGC, he represents the hardliners. “He’s an end-of-days man,” says a former Israeli intelligence officer who worked on Iran, a reference to the Shia millenarianism that some reckon guides him. Mr Vahidi believes America will only tighten the noose. Iran should resist while it can. The current economic hardship, he argues, could spark renewed unrest of the sort seen in January. “They’re not sure they can survive another round of protests,” says a manufacturer. War, by contrast, would keep people indoors—and could rally some behind the regime.

If the hawks prevail, escalation will follow. Local commanders would revert to the tactics adopted at the war’s outset, reinstating a prepared list of targets. Strikes on tankers could resume, keeping Hormuz closed. They might also do the same in the Red Sea. American warships and Gulf cities could come under more fire.

Nor has President Trump’s objectives for the war shifted. The “red lines” he drew at the very start of the conflict have remained America’s “red lines” throughout.

Our objectives are clear.

First, we’re destroying Iran’s missile capabilities, and you see that happening on an hourly basis, and their capacity to produce brand new ones, and pretty good ones they make.

Second, we’re annihilating their navy. We’ve knocked out already 10 ships. They’re at the bottom of the sea.

Third, we’re ensuring that the world’s number one sponsor of terror, can never obtain a nuclear weapon. Never going to have a nuclear weapon. I said that from the beginning. They’re never going to have a nuclear weapon. They were on the road to getting one legitimately through a deal that was signed foolishly by our country.

And finally, we’re ensuring that the Iranian regime cannot continue to arm, fund, and direct terrorist armies outside of their borders.

To that list the only addition has been that Iran must surrender its illicit control over the Strait of Hormuz.

Meanwhile, Iran’s economy is collapsing. There is no speculation on that point, as even Iranian media outlets openly concede as such.

Iran has already begun tapping its wealth reserves just to fund basic necessities for the Iranian people. With traceable oil exports down over 80% since the blockade began, the economic pressure on Iran is immense, pressure that is only going to grow with reports that Iran has already maxed out its oil storage capacities and is having to shut in production wells.

Iranian sources confirm that some shut ins are already happening.

Tehran is proactively reducing crude output in a move to stay ahead of capacity limits rather than waiting for tanks to fill completely, according to the senior official, who asked not to be identified because the information is sensitive. And engineers have learned how to idle wells without lasting damage and restart them quickly, officials say, after years of sanctions and shutdowns pushed the country’s oil industry through cycles of disruption.

“We have enough expertise and experience,” said Hamid Hosseini, a spokesman for the Iranian Oil, Gas and Petrochemical Products Exporters’ Association. “We’re not worried.”

While Iran has shut in production wells before, back in 2020, when the wells were brought back on line, it was with a loss of over 400,000bbl/d.

That Iran is understandably reluctant to proceed more quickly with shut ins than it absolutely must may be the cause of an oil slick detected recently off of Kharg Island, site of Iran’s primary oil terminal. If storage capacity is reached, crude may have simply spilled into the ocean—or was deliberately dumped.

Exactly how long Iran can endure this state of affairs is inherently problematic. While many independent analysts have assessed that Iran’s capacities to withstand the blockade run out after about a month—a time frame that has already largely passed—there have been contrarian assessments leaked from CIA sources suggesting that Iran has a far greater capacity to absorb the economic hits.

These assessments indicate that Iran has not been damaged as much by Operation Epic Fury as President Trump has maintained, and that the economic pressures of Operation Economic Fury are less than President Trump has maintained.

We must be cautious with such assessments, and not merely because they are obvious leaks to corporate media, which automatically implies an agenda of undermining the Trump Administration on Iran. As I have covered in previous articles, there are numerous open source assessments that Iran’s storage capacities and ability to endure without the influx of oil revenues exports had been providing are extremely limited. Part of Iran’s seeking land routes from the Pakistani port of Karachi to Iran is the economic strain the country is enduring.

At the same time, that oil flows from the Persian Gulf are disrupted is carrying significant economic risks for the world’s economies.

In an interview with CNBC, Maersk CEO Vincent Clerc warned on Friday that if oil flows were not quickly restored there would be significant price shocks across a number of goods, as shipping companies begin passing along the costs of elevated bunker fuel prices.

“What this this energy shock is going to mean is about $500 million of extra costs per month for as long as the oil remains around in the in the $100 per barrel neighborhood, that is significant,” Clerc told CNBC. “And there is so much we can do on reducing costs, but there is a lot we need to do on passing on these costs to customers, because it’s such a massive cost increase that we can’t shoulder it.”

We cannot dismiss Clerc’s warning out of hand, because it is already certain that Persian Gulf oil production is significantly reduced, with Saudi Arabia, the UAE, and Iraq all reporting major production cuts in March.

The disruptions are also impacting refined products which normally flow from the Persian Gulf, most notably aviation fuel.

Global shipments of jet fuel have fallen to their lowest level on record, as the blockage to the Strait of Hormuz threatens to suffocate supply to the world’s airlines.

Under 2.3m tonnes of jet fuel and kerosene were shipped around the world last week, according to analysts at Kpler, marking the lowest level since records began in 2017.

With the summer travel season rapidly approaching, jet fuel shortages could create significant increases in the costs of vacation travel, and a corresponding destruction of travel demand, as consumer respond to the expected price shock in air fares.

Looking farther ahead, food price concerns are also growing, as the increased costs for petroleum and natural gas impact fertilizer production and fertilizer costs.

The war in the Gulf connects to higher prices on a baguette via three slow steps. Gas becomes fertilizer. Fertilizer feeds crops. Crops become food. Each takes weeks; the full cycle lasts months.

“Most of the food currently on supermarket shelves was produced using inputs that were purchased or contracted before the crisis fully unfolded,” said David Laborde, who runs the Agrifood Economics Division at the U.N’s Food and Agriculture Organization. “The current stability mainly reflects timing, not immunity.”

Europe produces its own nitrogen fertilizer, but makes it from imported gas. When Gulf disruption pushes gas prices up, European-made fertilizer gets more expensive too.

Even in the US, farmers are experiencing significant and sudden increases in fertilizer prices, as the disruption of Persian Gulf oil flows raises petroleum prices globally.

That energy prices have risen dramatically since the start of the war is empirically obvious—as is that the prices are falling more significantly on Europe than on the US.

Even global diesel prices are up over 60% since the start of the war—and that will exacerbate the transportation cost shocks described by Vincent Clerc in maritime shipping.

Price shocks in essential manufacturing inputs is already creating a stagflation crisis in China.

If this war continues, stagflation is likely to spread through the rest of the world’s economies, including that of the United States.

As of this writing, we have not yet seen the April Consumer Price Index data—that is not due until May 13—but we are sure to see additional energy price inflation. The question will be if energy price inflation is having a contagion effect and pushing up other prices as well. If that should be the case, the US will be well on its way to having a stagflation crisis not unlike that of the 1970s, and driven by largely the same forces: disruption of global oil supplies.

It seems unavoidable that, at this point, there will be more war, and it is certain that the closure of the Strait of Hormuz will continue for at least a little while longer. It is therefore certain that the world, and not just Iran, will endure the economic ramifications of the war.

Please Support Independent Journalism

What Is The Alternative?

The grand question over everything taking place in the Persian Gulf is “what is the alternative?”

Is this war the right choice at the right time?

Is there an unexplored diplomatic possibility that needs to be considered?

Certainly the leaders of Europe have talked at length about the need for talks, and Pakistan has sought with diligence and industry to play mediator and bringing about talks between Iran and the US.

If there is a legitimate diplomatic option, the US would do well to consider it.

At the same time there is no getting around the reality that Iran’s actions in the Strait of Hormuz are a violation of every freedom of navigation principle there is, principles which predate even the UN Convention on the Law of the Sea, which clearly forbids Iran’s actions.

There is no getting around the reality that Iran’s nuclear weapons program has been an ongoing violation of Iran’s obligations under the Nuclear Non-Proliferation Treaty, which Iran signed and ratified.

There is no getting around the reality that the IRGC-led Khamenei Regime has doubled down on these violations of international law, even proposing that all sanctions be lifted while Iran continues to violate both UNCLOS and NPT.

There have been multiple diplomatic overtures extended to Iran, and in each one Iran has rejected what have been fundamental and essential positions from the United States: surrender illegal control of the Strait, dismantle the country’s network of support to a variety of Islamist terrorist militias—Hezbollah in Lebanon, Hamas in Gaza, the Houthis in Yemen—and surrender the entirety of the nuclear weapons program.

These are positions the IRGC has not wavered on, and they are positions the Trump Administration negotiators have not wavered on.

With neither side willing to back down on at least these points, is it possible to resolve this conflict by any other than force of arms? That seems unlikely.

The IRGC has for years been pursuing a course which contravenes established norms of international law and treaties Iran itself has signed. There is no serious debate to be had on that point. The lawlessness of the IRGC was the catalyst to last year’s Twelve Day War and it was the catalyst to Operation Epic Fury.

That lawlessness makes war with Iran more of an inevitability than an option. So long as the IRGC is determined to follow a course of shredding international maritime law and UN treaties, the question regarding war with Iran was never an “if”, and always a “when”.

This war has already cost the Iranians much, and will cost them even more. This war has already cost Europe much, and will cost them even more. This war has already cost the US much, and will cost us even more.

As steep as those costs are likely to become, is there any good answer to the question “what is the alternative?”

At present, the answer appears to be “none.” God help us all.

Please Support Independent Journalism

For April ADP hopped on the BLS bandwagon and printed a blowout National Employment Report showing strong growth across all job sectors, for an aggregate of 109,000 new jobs.

ADP’s Chief Economist Nela Richardson provided her usual optimistic statement for the press release, touting job gains among small businesses.

“Small and large employers are hiring, but we’re seeing softness in the middle,” said Dr. Nela Richardson, chief economist, ADP. “Large companies have resources to deploy, and small ones are the most nimble, both important advantages in a complex labor environment.”

Coming in the second month of a war with Iran that has sent energy prices soaring, that April surpassed March by more than 40,000 jobs is a remarkable report by any measure.

The March figures have subsequently been revised downward, to 61,000.

How strong was the report? The Wall Street consensus was some 10,000 jobs less, and the Trading Economics Forecast was only 8,000 jobs above the March number.

Wall Street was not expecting the ADP report to be this strong.

Coming as it does on the heels of a strong March Job Openings and Labor Turnover Report, and with minimal revisions from March, the ADP report is a strong signal that labor markets in the US are waking up.

Will the April Employment Situation Summary also surpass Wall Street expectations?

With a consensus projection of 73,000 private sector jobs, and a Trading Economics forecast of 83,000 private sector jobs, the stage is certainly set for the “official” monthly jobs report to do exactly that—or provide a crushing disappointment.

Please Support Independent Journalism

Almost Every Sector Showed Growth

One reason the March JOLTS report deserves serious scrutiny was that it showed job growth in every sector.

The April ADP report very nearly matches that.

While healthcare provided the bulk of the jobs reported, only Professional and Business Services reported a loss of jobs in April.

The ADP report has been showing consistent job growth for several months, with six of the last nine months at 60,000 jobs or more.

Manufacturing showed a welcome increase in jobs, the first such increase on the ADP report since March 2024.

Construction and Mining were also positive on the month, making the ADP report very positive for goods-producing jobs.

Among service-providing sectors, only the Professional and Business Services segment lost jobs in April.

Trade, Transportation, and Utilities reversed a March decline, printing 25,000 jobs.

Leisure and Hospitality, Information, and Finance all showed solid if unremarkable gains.

By far Healthcare showed the biggest increase in jobs, with more than half of the total jobs created for April

As with the March JOLTS report, job gains across all sectors but one signals rising labor demand, and that is a necessary predicate to wage growth.

Please Support Independent Journalism

New Strength In Goods Producing Jobs

The ADP report has shown positive job growth among service producing jobs for the last nine months. Goods producing job sectors, however, were shedding jobs for most of 2025. 2026 has been a year of new strength for the goods producing job sectors, even as service producing job sectors stayed strong.

That 2026 is a year of recovery for goods producing jobs coincides with the return to expansion for the Institute for Supply Management Manufacturing PMI.

April was also a month of improvement in the S&P Global Manufacturing PMI, which has been printing expansion for several months, but surged to 54.5 from March’s 52.3.

As with the March JOLTS data, the ADP report is consistent with the PMI data showing manufacturing coming out of the gate strong for 2026.

Please Support Independent Journalism

ADP Report Consistent With Unemployment And Layoff Data

The ISM PMI data are not the only metrics consistent with the ADP jobs report.

The Department of Labor’s unemployment data has been charting a steady decline in initial unemployment claims going back into last fall.

Continuing claims have also been charting a decline since the fall.

The decline in continuing claims especially has been more rapid in recent weeks, a trend which is entirely consistent with the job growth being reported by ADP.

The Job Cut Announcement report from outplacement firm Challenger, Gray, and Christmas also indicates 2026 is a stronger year for jobs than 2025. In the first three months of 2026, only January exceeded 2025 levels for layoffs and job cuts.

These employment reports are independent signals that are consistent with what the ADP report is showing for 2026. We have at least these reports as reason to take the ADP report at face value.

Please Support Independent Journalism

Not All Other Data Shows Strength

While the ADP report is backed up by a number of independent metrics indicating an improving economic situation, we should not pretend that there are not countervailing signals which present a far less optimistic view of American jobs markets.

The ISM Manufacturing Employment metric has been printing contraction since January 2025.

The ISM Services Employment metric has been more volatile than the ADP data suggests for service-providing jobs.

Nor should we overlook that the Bureau of Labor Statistics unemployment level data indicates that joblessness has been trending up since mid 2023, a long-term trend which has persisted through last month’s Employment Situation Summary.

If overall unemployment levels are rising in this country, then jobs markets are less robust than the ADP report indicates.

Please Support Independent Journalism

Is The Data Real?

If the ADP report is accurate, American jobs markets have expanded significantly in recent months.

If the ADP report is accurate, labor demand is increasing at a significant pace.

The caveat, of course, is the predicate stated both times: “if the ADP report is accurate.”

Is the ADP report accurate? That revisions to the March report were only 1,000 means the report’s authors at the very least consider the report to be accurate.

The ADP report presents us with the same question as the March JOLTS report: Is the jobs recession coming to an end? The ADP report invites us to reach the same conclusion as that implied by the JOLTS report: yes, the jobs recession is coming to an end.

Could the ADP report be wrong? Absolutely it could be wrong. As with all of the jobs reports, the ADP report is fundamentally a report of estimates and extrapolations. As we have seen with the Employment Situation Summary, the extrapolations themselves can be problematic. If the baseline models upon which the estimates are based are flawed, the reports generated will be flawed.

By the same token, the ADP report could be correct. The baseline models might not be flawed, or might not be egregiously flawed.

This much is certain: The ADP report raises the expectation bar for Friday’s April Employment Situation Summary. After the blowout month the BLS jobs report had in March, that ADP prints a blowout report for April suggests the BLS jobs report will be positively stellar.

Is the jobs recession ending? ADP is telling us that it is.

Please Support Independent Journalism

The number of job openings was unchanged at 6.9 million in March, the U.S. Bureau of Labor Statistics reported today. Over the month, hires increased to 5.6 million while total separations changed little at 5.4 million. Within separations, both quits (3.2 million) and layoffs and discharges (1.9 million) were little changed.

Corporate media was typically chagrined that the much-touted and supremely meaningless job openings number had actually slipped a little. The metric that does have meaning, however, is the hiring numbers.

Hiring rose significantly, and even though separations rose as well, overall net hiring rose at a pace in keeping with the jobs numbers from the Employment Situation Summary.

Does a strong net hiring number indicate the jobs recession has reached a bottom? Is a turnaround and actual growth in net hiring in the very near future?

With strong net hiring across all sectors, the March JOLTS report gives us good reason to hope so.

Please Support Independent Journalism

Openings Fell, But Hiring Surged

Corporate media much prefers to see large inflated job openings numbers. It’s not a rational fixation, since roughly half of those so-called job openings are not being filled by anyone. With that fixation, outlets such as Bloomberg were not happy that job openings ticked down slightly in March.

Available positions fell slightly to 6.87 million from a revised 6.92 million in February, according to Bureau of Labor Statistics data released Tuesday.

We can easily see that the emphasis on job openings is exaggerated, just by looking at the JOLTS data from 2021 onward.

Since the COVID Pandemic Panic, job openings have been consistently overstated. At its 2022 peak, the fictitious job openings were more than double actual hiring.

While job openings moved down slightly, when we look at the data since 2021, there is a distinct “bottoming out” of the job openings curve. Hiring and separations also are near the levels they were at in January 2025: 5-5.5 million hires and 5-5.5 million separations.

Job openings, hires, and separations have all trended down since 2022. Through 2025 into 2026, that trend has flattened out considerably, consistent with the data finally having established a floor. The March hiring data is an increase off that floor level.

That is the sort of trend turnaround that would signal the jobs recession that has bedeviled US labor markets since 2023 is at last coming to an end.

Certainly, that is the hope of Navy Federal Credit Union Chief Economist Heather Long.

“Is the hiring recession finally over? There are encouraging signs,” Heather Long, chief economist at Navy Federal Credit Union, wrote in an e-mail.

“The big concern is the war in Iran could halt that much needed progress in the labor market,” she wrote.

What is clear from the data is that net hiring in March was consistent with the growth in payrolls per the Employment Situation Summary.

Given that both reports are produced by the Bureau of Labor Statistics, we should expect some convergence, and might even view that convergence as an indication of statistical bias. At the same time, during last summer the two reports varied significantly, demonstrating that convergence was not a given.

For the past few months, however, the JOLTS and ESS reports have printed very similar results.

Please Support Independent Journalism

Sectors Advanced In March

Even more encouraging than corporate media and Wall Street “experts” belatedly conceding that the jobs recession has been real is the broad base for the net hiring surge.

Manufacturing, which has been hemorrhaging jobs for over two years, saw a jump in net hiring.

Construction, while printing cooler net hiring than in February, still turned in a fifth straight month of positive net hiring—the first time since October 2024 that has happened.

Trade, Transportation, and Utilities, a major service sector, rebounded from February’s job losses to show net hiring gains.

Professional and Business Services showed continued recovery, printing a fourth consecutive month of positive net hiring.

Healthcare, which has carried more than a few jobs reports, rebounded from a weak February to have a strong March.

Leisure rounded out the service sector also by showing a rebound from a horrible February, with its third best net hiring gains since the start of Trump Administration 2.0.

Every sector of private employment showed some measure of improvement in March. Such breadth in job growth is another reason to consider the possibility the jobs recession is ending. Broad job growth is an actual indicator of robust jobs markets, where hiring is strong everywhere rather than being concentrated in one or two industries.

Please Support Independent Journalism

PMIs Show Strength In Manufacturing

The JOLTS data paints an optimistic picture, and some might say too optimistic. The growth in manufacturing jobs, for example, is at odds with the Manufacturing Employment PMI data from the Institute for Supply Management, which shows the sector still contracting on jobs.

However, the overall Manufacturing PMI from ISM has been strongly in expansion territory since the beginning of 2026.

However, we should also note that the ISM Services Employment PMI also prints worse than the overall Services PMI.

The overall Services PMI, however, shows consistent expansion in services since the start of 2025.

The employment components of the ISM PMI data gives us reason to doubt the JOLTS report, but the overall PMI shows industries expanding, a condition consistent as well as necessary for expanded net hiring.

The PMIs give us reason to be skeptical, but also reason to hope that jobs markets are starting to improve at long last.

Please Support Independent Journalism

The End Of The Jobs Recession?

One month does not make a trend, and we should take care not to read too much into the strong JOLTS data for March.

We should acknowledge, however, that the JOLTS data for March is strong.

The JOLTS data for March is strong across the board, a rising job tide that is legitimately lifting all job ships.

Strong job growth—strong actual hiring and not merely a tantalizing promise of a job “opening”—is an indication labor demand picked up in March.

Growing labor demand is essential to having improved gains in wages and earnings. The greater the actual pace of hiring, the greater the real demand is for workers, and the greater the pressure to bid up wages across the board. Just as scarce supply increases prices for goods and raw materials, scarce labor supply increases wages.

With hiring having trended down since 2022 before showing signs of bottoming out during 2025, we have not seen strong labor demand, meaning we have not seen strong wage pressures, and so we have not seen the level of robust wage gains many sectors need to see to finally catch up to the effects of the 2022 hyperinflation cycle.

With March data looking strong, the next question naturally turns to the upcoming April jobs numbers. Will the second month of war with Iran show continued job growth?

Will the dislocations and price shocks from Iran illegally closing the Strait of Hormuz and disrupting 20% of global oil supply show their full effect by suppressing job growth, choking off the potential jobs recovery even before it has a chance to get started?

The war with Iran made its presence felt in March, with pronounced energy price shocks driving both consumer price inflation and factory gate inflation. Those shocks did not make their presence known in the March jobs data.

Is April the month where the dislocations reverberating out of the Persian Gulf start to impact employment here in the US? Or is a jobs recovery underway capable of powering past those dislocations?

March was a strong month for jobs in this country. If April is even close to the same despite the headwinds of war, we may plausibly begin to consider the jobs recession coming to an end at long last.

Please Support Independent Journalism

The UAE's defense ministry said three cruise missiles coming from Iran were intercepted and a third fell into the sea, and told its citizens the loud booms heard inside the country were the result of those aerial interceptions.

Three Indian nationals were injured in the attacks, which were concentrated on the Fujairah Oil Industry Zone.

Separately, US Apache and SH-60 Seahawk helicopters engaged and destroyed several small Iranian craft in the Strait of Hormuz itself, as the IRGC launched cruise missile and drone attacks at ships within the Strait.

This was the first real escalation of hostilities by Iran since the US Navy began its blockade of Iranian shipping on April 13.

The attacks have been framed as a bold and assertive response by the IRGC to ongoing tensions in the Persian Gulf, but it may very well prove to have been an epic blunder, as the attacks revealed the extent to which allegiances and alliances in the Gulf have evolved.

Please Support Independent Journalism

IRGC Naturally Claimed Provocation

In what has become its expected pattern, the seeds for today’s attacks were apparently sown yesterday on Iranian state television, when broadcasters accused the UAE of participating in air strikes on the Iranian islands of Siri and Lavan.

Iranian media was apparently recycling a claim made at the beginning of April, that UAE Mirage-2000-9 jets were involved in a strike on the refinery on Lavan. Both the US and Israel claimed to have not been involved in a strike on Lavan, raising the possibility that the strike may have been the result of a regional actor.

That possibility was fueled in part by Iran’s apparent downing of a Chinese-made Wing Loong II drone, operated by either the UAE or Saudi Arabia, earlier that week. Neither Riyadh, Abu Dhabi, or Washington DC either confirmed or denied the loss of a drone, but there has been growing speculation that the two leading members of the Gulf Cooperation Council might be cooperating with the US against Iran to a greater degree than has been publicly disclosed.

Naturally, the UAE condemned Iran’s attack.

The United Arab Emirates has condemned in the strongest terms the renewed terrorist, unprovoked Iranian attacks targeting civilian sites and facilities in the country using missiles and drones, which resulted in the injury of three Indian nationals.

In a statement, the Ministry of Foreign Affairs (MoFA) affirmed that these attacks constitute a dangerous escalation, an unacceptable act of aggression, and a direct threat to the UAE’s security, stability, and territorial integrity, in violation of the principles of international law and the Charter of the United Nations.

The UAE emphasized that it will not tolerate any threat to its security and sovereignty under any circumstances, and that it reserves its full and legitimate right to respond to these unprovoked attacks in a manner that ensures the protection of its sovereignty, national security, territorial integrity, and the safety of its citizens, residents, and visitors, in accordance with international law.

The Ministry further underscored that targeting civilians and civilian infrastructure is unequivocally condemned and rejected under all legal and humanitarian norms, stressing the need to immediately halt these attacks and ensure full compliance with the cessation of all hostilities. The UAE holds Iran fully responsible for these unprovoked attacks and their repercussions.

Iran almost predictably stepped up its rhetoric against the UAE, warning the Emirates to to “take any unwise action” against the Khamenei regime.

“No official threat has so far been announced by the Emiratis,” the military source told Tasnim. “But if the Emiratis become a plaything of Israel and make a wrong move, they will learn a lesson they will never forget.”

“If the UAE takes any unwise action, all its interests will become targets for Iran, and no part of Emirati facilities will be safe,” the source added.

While it remains unclear if UAE fighter jets or drones have been involved in minor strikes against Iran, what is absolutely clear is that Iran views the UAE with greater hostility than it does even Israel, as the Emirates have been subjected to heavier missile and drone attacks than Israel.

Please Support Independent Journalism

Israel Promises To Help Defend The Emirates

Whatever Iran hopes to accomplish with its persistent attacks on the UAE, it very likely has made one major miscalculation: Israel has not been shy about coming to the UAE’s defense.

It has been previously reported that Israel has deployed its “Iron Dome” laser defense system to the assist the UAE with its air defenses.

That Israel was defending the UAE against Iranian attacks came to the fore once again as a result of today’s attacks.

Israel had secretly deployed an Iron Dome aerial defense system — and the soldiers to operate it — to the UAE at the beginning of the war with Iran, bolstering the Persian Gulf nation’s defenses. The deployment, first reported by Axios, was a clear sign of growing cooperation between Israel and the UAE.

Other aerial defense systems may also have been used to intercept the incoming Iranian projectiles. At least three missiles were intercepted, Emirati authorities said. It was not immediately clear how many were shot down by the Iron Dome system.

The attacks were also an opportunity for Israel to remind the world that the UAE had signed the Abraham Accords with Israel, and former Israeli Prime Minister Naftali Bennett made it clear that Israel would stand by its “strategic ally”.

If Iran hoped to alienate the Arab states from both the US and Israel by subjecting them to attack, at least with the UAE it failed spectacularly. In a moment where the meaning, spirit, and substance of the Abraham Accords could have been called into question, Israel has made it clear there is no question: Israel means to honor the accords and come to the aid of the UAE.

Will this make other Arab states more likely to sign on to the Abraham Accords with Israel? It is far too soon to say with certainty that will be the case, but it is hard to envision the Abraham Accords not taking on a much more favorable light in Arab capitals after today.

Please Support Independent Journalism

Iran Tipped Its Hand—It Means To Control All Of Persian Gulf Oil

Iran may have revealed more than it intended about its overall ambitions in the Gulf with the UAE attack.

The Fujairah Oil ​Industry Zone is not just a major UAE oil refinery. It is also one of the few oil terminals in the region which lies outside the Strait of Hormuz.

Iran attempted to disable one of the few alternatives to sending tankers through the Strait of Hormuz.

Even as Iran continues to push its claim of right to control traffic through the Strait—a claim which is completely rejected by the UN Convention on the Law of the Sea (UNCLOS)—Iran is separately attacking the infrastructures which Arab States might use to bypass the Strait and thus negate Iran’s diplomatic leverage of being able to deny Arab states in the Gulf the capacity to export their oil and natural gas.

If that is Iran’s intent, then the strikes on Fujairah are an unmistakable act of war. They are an aggressive demonstration of Iran on offense, not defense. That is not something that other Arab states, particularly Saudi Arabia, will have failed to notice.

It is not something any of the Arab states dare ignore, not if they wish to avoid bending the knee to Iran.

Please Support Independent Journalism

No US Or Israeli Retaliation…Yet

As of this writing, neither the US nor Israel has commenced any retaliatory strikes on Iran, although earlier unconfirmed reports were that strikes would be occurring within the next 24 hours.

Social media reporting was has also been rife with speculation that the UAE is prepared to declare war against Iran, although as of this writing no such declaration has been made.

Will there be retaliation? Will the UAE make a formal war declaration? At present these question are unanswerable.

Will President Trump choose to maintain the ceasefire instead? That question also is unanswerable.

Should the UAE actually declare war—or if it should end up participating in retaliatory air strikes alongside the US and especially Israel—Iran will have catalyzed a tectonic shift in the geopolitics of the Middle East.

The UAE has been a signatory to the Abraham Accords since 2020, as part of an extended diplomatic effort begun during the first Trump Administration to develop normalized relations between Israel and her Arab neighbors. Iran’s attacks have already created an opportunity for Israel to come to the defense of an Arab nation. We cannot rule out Israel and the UAE fighting side by side against Iran in at least a brief retaliation for the attack on Fujairah.

Given the long history of enmity between the Arab countries and Israel, for even one Arab state to become a military ally of Israel against a common adversary is an outcome that would have been considered unthinkable even just a few weeks ago. We are now at a juncture where that might be inevitable.

If an Arab-Israeli coalition against Iran does materialize, it is difficult to envision how the IRGC survives and remains in power.

The IRGC may have thought it was making a bold move and doing a little geopolitical flexing with its attack on the UAE. It is quite likely this attack will prove to be an epic blunder.

Tonight the ceasefire is holding. Tonight, the IRGC is still in charge in Tehran.

How long either of those statements remains true is anyone’s guess.

Please Support Independent Journalism

The “Transit of Goods through Territory of Pakistan Order 2026” took effect on April 25, formally designating six specific land corridors. These routes now allow third-country cargo destined for Iran to move securely across Pakistani soil, backed by strict customs safeguards.

The announcement came close on the heels of Iranian Foreign Minister Abbas Araghchi’s brief trip to Islamabad, suggesting opening the land routes was discussed during his visit.

Why did Pakistan agree to open the land routes? Certainly one reason was the efficacy of the US Navy blockade of Iranian shipping into the Persian Gulf has left some 3,000 cargo containers stranded in port at Karachi, waiting for Iranian-bound vessels that may never arrive.

Establishing land routes to move cargo out of Karachi and into Iran is undeniably good business for Pakistan. The cargo that has been languishing in Karachi will undoubtedly be welcomed in Iran. Yet after the backlog of containers is cleared, how much more cargo traffic Pakistan will move into Iran remains to be seen. The degree to which Pakistan will move Iranian exports also remains to be seen.

Can the overland importation of goods from Pakistan into Iran slow the latter country’s ongoing economic collapse? That seems unlikely.

Please Support Independent Journalism

Iran Replacing UAE With Pakistan As Trading Partner

What gives this story increased relevance was a four-part X post made by Iran’s Fars News Agency yesterday, talking up the significance of the arrangement.

According to Fars, this arrangement has been the product of lengthy negotiations dating back well before Operation Epic Fury.

What is most remarkable about the Fars statement, however, is the third part:

In recent years, Iran has conducted a significant portion of its imports and transit through the ports of the United Arab Emirates (especially Jebel Ali); a route that has now become unstable due to the intensification of the maritime blockade and political changes in the region.

Prior to the US war with Iran, most Iranian imports, per Iranian sources, flowed through the United Arab Emirates.

Immediately after Operation Epic Fury began, however, Iran’s retaliatory strikes focused not on Israel, and not on US military assets, but on Iran’s Arab neighbors. Specifically, Iran focused on the United Arab Emirates.

A mere two days after the first strikes by US and Israeli jets on February 27, the UAE was targeted by more than 200 drones and 137 ballistic missiles. Iran’s targets in these attacks included five star hotels as well as the international airport in Dubai.

So lopsided were the attacks on Gulf states that even the Qatari-owned New Arab media outlet reported on them, citing the Israeli Institute for National Security Studies.

The New Arab could not verify the numbers independently, but the figures purport that attacks on Gulf states and other Arab countries during the first four days of the war included 812 drones and 186 missiles directed at the UAE, 92 drones and 74 missiles towards Bahrain, 46 drones and 116 missiles towards Qatar, 36 drones and 13 missiles towards Jordan, five drones towards Oman, 384 drones and 178 missiles towards Kuwait, three drones and two missiles towards Cyprus, 13 drones and two missiles towards Saudi Arabia, in addition to 70 missiles and drones directed at Iraqi Kurdistan.

Notably, Israel responded to the attacks on the UAE—which is a party to the Abraham Accords—by deploying its “Iron Beam” laser defense system to aid in the Emirates’ air defense.

Not only did Iran decide to turn on one of its main trading partners in retaliation for Operation Epic Fury, it showed the Abraham Accords to have real diplomatic substance, as Israel took full advantage of the opportunity to step up and aid in the defense of an economic partner and ally.

Six weeks after burning an important economic bridge via the UAE, Iran is only just beginning to build up a new one via Pakistan.

Has Iran been simply using the United States’ war as a cover to shift its geopolitical focus away from the Persian Gulf, embracing its eastern neighbor instead? Certainly that is one plausible interpretation of these events.

It is, however, remarkable that the trade arrangements with Pakistan were not in place when Iran opted to force things by closing the Strait of Hormuz.

If the shift eastward was Iran’s intention from the start, its execution of that shift has been beyond shambolic.

Please Support Independent Journalism

Iran’s Oil Storage Is Filling Up

What the Pakistani land routes will not resolve is Iran’s ability to export its crude oil.

While we have to be cautious about taking any outside reporting about events in Iran at face value, media narratives both in the Middle East and in the West have consistently been reporting that the US Navy’s blockade of Iranian shipping has caused major disruptions to Iran’s oil exports.

Reuters has reported that, according to oil analytics firm Vortexa, traceable oil exports from Iran are down more than 80% since the US blockade began on April 13.

“At this stage, we ​estimate that around 4 million barrels of Iranian crude has successfully moved out of the Gulf of Oman. We are not currently ​able to confirm whether any of those vessels have since been interdicted,” it said in an email to Reuters.

While a number of tankers are reportedly turning off their Automatic Identification System (AIS) transponders in order to slip past the US Navy cordons, making absolute measurements of the amount of interdicted oil impossible, the data that can be obtained indicates Iran’s oil exports are largely constrained.

Certainly the price shocks hitting China’s economy even now indicate major dislocations in its oil shipments from the Persian Gulf, including Iranian oil.

If China is not able to receive shipments of Iranian oil—and China is the nation which has been the most aggressive in bypassing sanctions on Iranian oil—the presumption that Iran is unable to ship out oil is not at all unreasonable.

This backdrop makes reporting that Iran is already curtailing oil production quite credible.

Tehran is proactively reducing crude output in a move to stay ahead of capacity limits rather than waiting for tanks to fill completely, according to the senior official, who asked not to be identified because the information is sensitive. And engineers have learned how to idle wells without lasting damage and restart them quickly, officials say, after years of sanctions and shutdowns pushed the country’s oil industry through cycles of disruption.

“We have enough expertise and experience,” said Hamid Hosseini, a spokesman for the Iranian Oil, Gas and Petrochemical Products Exporters’ Association. “We’re not worried.”

While we have to be cautious whenever reporting relies on unnamed sources, as the Bloomberg reporting does, that there is at least implied confirmation from a named source is an indication that the report is legitimate.

Certainly the Saudi-owned Al Arabiya outlet wants the reporting to be true, although given the attacks Iran has made on Saudi oil infrastructure since this war began, we should not ignore the obvious bias the Saudis would have in amplifying narratives of Iranian oil production in a chokehold because of the US Navy blockade.

Oil storage is being presented as one reason for a purported increase in fuel smuggling into Pakistan, with literally thousands of small trucks and cars clogging Iran’s border crossings.

Presumably, the Khamenei regime is not making any effort to curtail the fuel smugglers, as the more gasoline and diesel they smuggle out of the country, the more storage capacity is freed up for ongoing production.

How accurate is this assessment? There is no way to tell at this time, although it does fit with other reporting on Iran’s oil infrastructure. Certainly the increases in futures prices for Iranian crude, which have tracked increases in global benchmark pricing, do not indicate a pre-war level of availability for Iranian oil.

While the precise timeline of Iran’s oil storage capacity filling up is extremely problematic, that Iran’s oil storage capacity is filling up is the best assessment of what is happening in Iran right now.

Please Support Independent Journalism

Iran’s Economy Is Collapsing

We do not need to wonder if Iran’s economy is collapsing. Even Iranian sources are conceding that point.

As reported in Iran International, Iranian state media has begun openly reporting on the country’s metastasizing economic woes, and openly challenging the regime about them.

“What is going on in this country, Mr. Pezeshkian?” state TV anchor Elmira Sharifi asked earlier this week, staring directly into the camera after reporting that many Iranians can no longer afford basic staples such as rice, sugar, cooking oil, fruit, dairy products and medicine.

Had President Masoud Pezeshkian been watching, he might have been startled. State television rarely addresses officials so directly or publicly demands accountability. But he is no stranger to criticism. Calls for answers have become routine in the press and on social media.

The pace of the collapse can be seen in the “free market” (which is to say, the black market) exchange rate of the Iranian rial against the dollar

Although the rial had strengthened considerably in the opening days and weeks of the war, shortly after the US Navy began its blockade on April 13, the rial went into free-fall, and, as of this writing, continues to do so.

The currency collapse is only the start of Iran’s problems. Spiraling unemployment is another.

Iran has lost at least 1 million jobs directly because of the war, Deputy Labor Minister Gholamhossein Mohammadi said, according to state media.

But the ripple effects put some 10 million to 12 million jobs at risk — half of Iran’s labor force — warns Hadi Kahalzadeh, an Iranian economist.

Israeli and US air strikes have reportedly damaged or destroyed some 20,000 factories, or 20% of Iran’s industrial plant capacity. Iran’s two biggest steel producers, Mobarakeh Steel and Khuzestan Steel, have halted production, as have numerous petrochemical refineries.

Al Jazeera’s reporting on Iran’s economy pulls very few punches, citing government mismanagement as well as effects of the war as the catalysts for the economic meltdown.

A toxic mix of local mismanagement, the bombardment of Iran’s infrastructure, US sanctions and a naval blockade, as well as a near-total internet shutdown imposed by the authorities in Tehran – now in its 64th day – is pummelling the economy in the country of more than 90 million people.

With wages not at all keeping pace with surging hyperinflation, Al Jazeera’s reporting indicates some Iranians may already be resorting to barter as a way to sidestep the currency collapse.

The monthly minimum wage in Iran is currently less than 170 million rials ($92), and that is after the government raised it by about 60 percent for the current Persian calendar year that started on March 21. The government is also offering subsidies towards food and essentials worth just less than $10 per month per person.

“You look at the prices and salaries, and you see the numbers don’t add up,” said one Tehran resident who asked not to be named.

“There’s not much you can do about it except to turn the little you have into something that is not depreciating or buying something you need that you might not be able to afford later.”

We should note that the Khamenei regime denies Iran is facing any difficulty obtaining and providing to the people essential goods and services.

We should also consider that Gresham’s Law holds that people spend “bad money” before “good money”. That Iranians are looking to purchase items that don’t depreciate in value suggests one purpose of such purchases would be to trade them for needed items in the future. Spending rapidly depreciating rials (“bad money”) for assets capable of sustaining value (“good money”) is exactly the behavior Gresham’s Law says we should expect in such circumstances.

Additionally, Iran’s online businesses are being systematically destroyed by the regime’s decision to cut off virtually all Internet in the country after the start of the war.

After 65 days of no internet and counting, Iran’s online businesses are reporting sales losses on average of 40%-50%, with some vendors unable to do any business at all.

The head of Iran’s online businesses association said on Sunday that internet policy had no clear authority, leaving the digital economy unsure which body to negotiate with.

Reza Olfatnasab said some online businesses had seen sales drop by 40% to 50%, while others had sales near zero.

Across the media landscape, the reporting is largely the same: Iran’s economy is in a state of collapse, and the regime is powerless to turn it around. With even Arab and pro-Iranian media outlets carrying that narrative, there is little reason to dispute it.

Please Support Independent Journalism

What Good Will The Land Routes Do?

While Pakistan will likely be able to move at least some of the 3,000 containers from the port at Karachi to their final destination in Iran as a result of the land routes being opened, how much those 3,000 containers will alleviate Iran’s economic distress is nothing if not extremely uncertain.

What the land routes will not do is help Iran export more oil. There are no oil pipelines running into Pakistan, or even close to the Pakistani border, and only one rail line, to Mirjaveh. Thousands of individual Iranians turning to fuel smuggling is not going to help the regime revive the economy, nor is it likely to delay for long the inevitable shutting in of production oil wells as storage supply becomes full.

With oil exports, and with non-oil export industries such as steel effectively shut down, the country’s ability to earn hard currency via exports in the form of dollars, euros, or even yuan is greatly diminished. Without that hard currency, paying for imports becomes increasingly problematic and increasingly inflationary.

With the regime disallowing internet access for all except those favored by the regime, an entire segment of the Iranian economy has, in effect, been completely shut down. Without vendors reselling imported goods, there will be fewer containers landing at Karachi en route to Iran.

Pakistan opening the land routes is arguably a humanitarian gesture, and is unquestionably good business for Pakistan, but it can have little practical long-term impact if there are not imports to be moved from Karachi to Iran. Without oil exports to generate the necessary cash, it is unlikely there will be much in the way of imports to move overland.

The best assessment of Pakistan’s move is that it offers Iran a band-aid when it needs a tourniquet to stop the bleeding. It is good for Pakistan as it clears cargo out of Karachi, but that is likely the most the land routes will accomplish.

Please Support Independent Journalism

From the preceding month, the PCE price index for March increased 0.7 percent. Excluding food and energy, the PCE price index increased 0.3 percent.

From the same month one year ago, the PCE price index for March increased 3.5 percent. Excluding food and energy, the PCE price index increased 3.2 percent from one year ago.

Everyone who was not comatose was already aware that energy prices were soaring and knew the reason why—Iran disrupting Persian Gulf oil flows by closing the Strait of Hormuz. The US war with Iran is the reason Wall Street projected year on year inflation per the PCEPI would be 3.5%, and for once Wall Street was spot on.

The suddenness of the war and of Iran’s strategic response to close the Strait of Hormuz left the usually highly accurate Cleveland Fed’s inflation nowcast a few steps behind the curve, with its projections for both headline and core year on year inflation 0.1pp below the actual print.

Like the earlier CPI report, the PCE data confirmed that inflation has returned to the US economy.

Yet the data was not without a few bits of silver lining. While energy price inflation surged, prices in other areas rose substantially less, or even declined.

Energy price inflation is real. Other inflation…not so much.

Please Support Independent Journalism

Not Quite The End Of “More Of The Same”

The Personal Income and Outlays report runs nearly a full month behind, so by the time we had the February data Operation Epic Fury had been headline news for nearly a month. The news from the Middle East made it clear that there was going to be a significant energy price shock in the March data. The news from the Middle East was why my assessment last month was that the February PCE data marked the end of “more of the same.”

Even when I first read the BEA’s report yesterday morning, that assessment appeared to be confirmed. However, that assessment was not entirely true.

Driven by energy prices, headline inflation did rise year on year, which was completely expected.

Core inflation also rose year on year, but the trend line was in keeping with prior months. Operation Epic Fury did not add new inflation pressures to core inflation.

One “more of the same” aspect of the March data was that core inflation actually eased month on month in March.

While consumer price inflation has been trending up year on year for both the headline and core metrics in the PCEPI, since January core inflation month on month has gotten cooler, dropping from 0.42% in January to 0.29% in March.

Not only did Operation Epic Fury not add new inflation pressures, it also did not sustain some of the inflation pressures already present.

As it turned out, past energy prices, the PCE data actually does contain “more of the same”, with several previous months’ trends being continued.

Please Support Independent Journalism

Energy Rose, But Food Fell

Headline inflation surged in March because energy price inflation surged—that much is obvious.

With oil prices up 33% on the month, how could energy prices not surge?

The surge was helped along by both gasoline and diesel retail prices having a violent trend reversal to also rise 36% and 42% on the month.

What did not help headline inflation move skyward were food prices. Food prices printed deflation month on month in March.

With food prices having shown inflation through the winter months, seeing the food subindex decline is a welcome change.

Even though energy prices have a tendency to permeate all other prices, food prices are the first indication that the inflationary pressures brought on by Iran mining the Strait of Hormuz have not moved beyond energy prices…yet

Please Support Independent Journalism

March Was Nondurable Goods’ Month To Rise

In the February data, looking past the headline numbers we saw that durable goods surged significantly. In March, it was non-durable goods’ turn to take off.

However, there is little doubt that energy goods drove most if not all of that increase.

That is what an 11.6% rise in energy goods and service prices will do to the PCEPI subindices.

That extreme surge in energy pricing also highlights a point of particular concern. Either despite a nearly 12% rise in energy goods and services pricing or because of it, real expenditures on energy goods and services declined in March.

People spent more on gas at the pump in March, but in real terms they bought less gas. While this is a somewhat predictable consequence of a price shock, this is also illustrates how sudden price shocks can lead to stagflation: instead of the rising prices being the consequence of rising consumption, rising gasoline prices have produced decreasing consumption. What normally acts as a brake on consumption for March energy prices acted as a suppressant instead, preventing rather than limiting consumption growth.

We see further evidence of this in the cooling of growth month on month in real personal consumption expenditures for March.

That real disposable personal income declined again in March does not help further any narrative of substantive economic growth.

When there is no growth in real disposable personal income, there are not going to be many prospects for sustained consumption growth. Consumption growth without income growth invariably hits a wall.

One data point that unfortunately is very much “more of the same” is the continued long-term decline of real disposable personal income year on year, which is accompanied by a somewhat more problematic downward trend in real personal consumption expenditures.

It is trends such as these that force us to mention “stagflation” with regards to the energy price shocks from the war with Iran. These are trends which suggest consumption growth is weakening in this country, and a sudden surge in energy prices can very easily suppress growth further.

When inflation is the proximate cause of absolute demand destruction, that is when we are starting to see stagflation.

Please Support Independent Journalism

Powell Remains Clueless About The Data

These key trends in real disposable personal income and real personal consumption expenditures also serve as yet another rebuttal to outgoing Federal Reserve Chairman Jerome “Too Late” Powell’s stubborn silliness in refusing to understand the data he pretends to study, as we saw from his final question during Wednesday’s post-FOMC press-conference.

Thank you, Chair Powell. Richard Escobito with CBS News.We’ve talked a lot about gasoline prices and even you mentioned airline ticket prices, both of which are up dramatically because of the war in Iran. And so I wonder, are you seeing that way down consumer spending in other parts of the economy and if so how worried are you that that will be a drag on growth.

Chairman Powell: you don’t see you don’t see it in spending yet you really don’t I mean as one of your colleagues said the economy has been resilient it really has not just this time but it’s been remarkably resilient for some years now. The U.S. economy has just powered through shock after shock, and consumers are still spending. And that’s what the banks will tell you, credit card companies will tell you, the retail sales numbers that we got most recently. People are still spending. And, you know, how long can that go on in a world where, if gas prices were to go up a bunch more, that’s taking otherwise spendable money out of people’s pockets, but right now we don’t actually see much slowdown yet—certainly none from this—but you think logically you will, because people have a certain amount of money they’re spending. If they’re spending 25% more in gas or something like that, then you know that’s going to come out of other spending. But again, we don’t see it yet.

Richard Escobito: One last thing. You mentioned those economies in Southeast Asia that are particularly dependent on petroleum, they make a lot of the stuff that American consumers buy. So was there any discussion today about whether or not those costs getting passed along to consumers is a real concern, and whether or not that might push up inflation?

Chair Powell: So all of those things are in or are in the models that, that we use to calculate inflation. So, you know, they’re, they’re just parts. You can ask about anything like that, and they are. They have a place, the staff has a place where they’re looking at that and pricing in, what will happen with higher prices and that kind of thing. So it’s there. The effects are not that big yet. You know, we’re a huge economy. The import sector is only 10% of the economy. So we’re not like a European country where 50% of the external—of GDP—is in the external sector. We’re also, you know, as I mentioned, we’re an oil exporter. So we’re not feeling the same kind of pain and we’re not likely to feel the same kind of pain that economies in Western Europe and certainly in Asia are feeling.

What Powell conflated in his word salad answers was nominal vs. real spending. Even looking at just energy goods and services, while in Powell’s world people are “still spending”—meaning they are spending more money on energy—in the real world they are buying less energy.

As consumers know only too well, inflation means you pay more but consume less.

Will the exposure of Southeast Asian manufacturers to energy price and supply shocks have a secondary effect on the US economy? That is a very real possibility. With regards to China it may even be a probability, as the data shows that China is already being hit hard with multiple materials pricing shocks across the whole of its manufacturing sector.

Arguably, we are already seeing the consequence of Asian producers passing on increased costs to American consumers, as imports were an outsized drag on GDP for the first quarter.

Imports are treated as a reduction in GDP, so an increase in imports—specifically, an increase in the dollar value of those imports—is a decrease in GDP.

Did higher producer prices push the dollar value of imports up in March? The broad GDP data does not let us answer that question definitively, but it is a question, and one that is likely to gain considerable relevance for April and beyond.

Powell did get one thing right: The US is better positioned than other countries to grapple with energy price shocks. We can see evidence of that just in the movements of diesel prices in Europe, Asia, and the United States.

Energy prices are up everywhere, but they are up more particularly in Europe.

Will importers pass along higher prices? Given the magnitude of price increase for a number of inputs, as well as for transportation both of people and cargo, we must assume that, unless oil prices return quickly to pre-war levels, all importers eventually will pass along at least some of their cost increases.

As we’ve seen just with energy goods and services, when prices are passed along, part of the consumer response is to buy less.

Please Support Independent Journalism

Stagflation A Rising Risk

While Jay Powell dismisses the potentials for a stagflation crisis within the US economy, the data has shown there have been significant potentials, needing only an inflationary shock to activate them.

Stagflation has quickly become a global concern in the wake of Iran’s closure of the Strait of Hormuz.

The war in the Middle East will likely affect the global economy and the United States, whether it continues for a short or long term, because of disruptions in the oil market that could trigger inflation and spur a recession, warn experts, economists and the International Monetary Fund.

Widespread stagflation could be the result of the war because of the long-term closure of the Strait of Hormuz, said Mohammad N. Elahee, a professor of international business at Quinnipiac University in Hamden, Connecticut.

It quite likely is a present crisis in China.

At present, the impacts to the United States from the closure of the Strait of Hormuz are still mostly limited to energy prices. We do not see significant price rises from non-energy goods and services—yet.

That word “yet” is going to be the watchword for how inflation and the overall economy evolve over the next few months. Whatever impacts we do not see right now, we may very well see next month or the month after.

Because we do not see all the impacts just yet, we should be cautious about assuming there will be no impacts, or less impact. We should be equally cautious about assuming the impacts will simply be price rises.

Proper understanding of the data in light of the war with Iran hinges on remembering that the stagflation phenomenon occurs when sudden price shocks collide with weak economic growth. Because price shocks are driven by the supply side rather than the demand side, the resulting inflation compels reduced consumption and economic contraction to bring supply and demand back into approximate equilibrium. When inflation is driven by demand side pressures, the result is constrained consumption and economic restraint.

If we see job markets soften, if real personal expenditures for any goods and services decline, we are entering the beginning stages of a stagflation crisis.

Will we enter those beginning stages? We won’t know the answer to that until it happens. That much of my assessment of the February PCE data remains very much on the table:

If the war with Iran continues to drag on, and especially if the recently and still quite fragile ceasefire fails to hold, we might see inflation and unemployment combinations that look distressingly stagflationary. The inflation data from both January and February leave that possibility very much on the table.

The key word in that assessment, of course, is “if”.

The March Personal Income and Outlays report confirmed what we saw in the March Consumer Price Index report: we have energy price inflation and lots of it. We do not have much inflation in other parts of the economy right now.

We are going to see elevated energy prices again in April. How much we see either inflationary impacts or stagflationary impacts beyond energy prices remains to be seen.

Beyond energy price inflation, the fog of war still surrounds the economics of wartime.

Please Support Independent Journalism

Amid global turbulence, China’s GDP expanded by five percent according to the official statistics in the first three months of 2026, up from 4.5 percent in Q4 last year. It was stronger than the market consensus of 4.8 percent and at the top end of the leadership’s target of 4.5-5 percent annual growth this year. Strong investment in infrastructure and manufacturing, led by state-owned enterprises, was crucial in returning fixed-asset investment (FAI) growth to positive territory. Yet the overall picture of the economy has not changed: growth continues to rely on strong manufacturing and exports, while consumption remains weak. The government’s cautious approach to policy support may be tested in the coming months as global uncertainties increase.

That is the narrative on paper.

More importantly, that is the narrative before Operation Epic Fury and the US war with Iran roiled global energy markets.

A return to economic growth and expansion is certainly a welcome change for China, which has been mired in deflation for years at this point—provided that it really is a return to economic growth.

As is so often the case, when media narratives collide with economic realities, the narratives do not do well.

The narrative is that China, in the first quarter of 2026, exceeded expectations and turned in strong economic growth.

The economic reality is that China remains mired in deflation. China may be on the precipice of a stagflation crisis, courtesy of Iran’s closure of the Strait of Hormuz as part of their war strategy.

Please Support Independent Journalism

Iran Upset Everyone’s Apple Cart

There can be no surprise that the data shows Iran’s decisions in its defense against Operation Epic Fury have roiled economies around the globe and are even now sending a significant energy price shock through those economies. China is far from immune to that price shock, and is even grappling with secondary price and supply shocks in a variety of petroleum-derived industrial chemicals, creating broad inflationary pressures across the whole of the economy.

Nor does recent price data on those same essential materials suggest the situation is getting any better.

Sulfur prices in China have been trending up over the past week, with prices now more than 60% above pre-war levels.

Polyethylene has also reversed and started trending up over the past week, and is now 25% above pre-war prices.

Styrene has not trended up, but its gradual decline appears to be bottoming out, at 30% above pre-war price levels.

Bitumen has had the most dramatic resurgence over the past week, pushing above 30% and closing in on a 35% price increase over pre-war price levels.

These are price and supply shocks which go well beyond energy, putting unanticipated cost pressures on most of China’s export-oriented manufacturing.

Please Support Independent Journalism

Inflation Or Stagflation?

These cost pressures are not shy about making themselves known, as China’s Producer Price Index showed a year on year increase for the first time in over three years.

While a return to inflation after years of outright deflation on the surface is a welcome change, the signs are that the resurgent factory gate inflation is indicative of “bad inflation”—i.e., stagflation.

A number of economists are concerned that the economic fallout from the war with Iran will coalesce into a global stagflation crisis, with high prices and suppressed growth everywhere.

The war in the Middle East will likely affect the global economy and the United States, whether it continues for a short or long term, because of disruptions in the oil market that could trigger inflation and spur a recession, warn experts, economists and the International Monetary Fund.

Widespread stagflation could be the result of the war because of the long-term closure of the Strait of Hormuz, said Mohammad N. Elahee, a professor of international business at Quinnipiac University in Hamden, Connecticut.

As is proving typical among the financial “expert” class, analysts at Goldman Sachs insist that China is likely to fare better than other economies, because of its presumed “energy diversification”.

An analysis by a strategist at Goldman Sachs said China is in better shape than other major economies to withstand an oil shock thanks to its energy diversification over the past 10 years.

“China looks better placed than most in this oil shock,” Kinger Lau, chief China equity strategist, wrote in a note on March 30, which was seen by Yahoo Finance.

However, this narrative is no more convincing than Goldman’s last glowing assessment of the Chinese economy.

The reality is that price shocks of more than 30% in a variety of essential materials used throughout China’s manufacturing pipeline are exactly the sort of sudden inflation spike which can trigger a stagflation crisis.

In addition, the suddenness of Iran’s closure of the Strait of Hormuz means China has lost a major source of below-market crude oil. Even though China has been stockpiling oil, anticipating a rupture between the US and Iran, that stockpile is a problematic shield against the higher crude prices China must pay.

For economic security reasons, China was prepared for a potential energy crisis stemming from the US threats to Iran, which intensified at the beginning of 2026. In the first two months of the year, Chinese oil imports surged 16 percent for stockpiling. Russia exported around 300,000 barrels/day more to China in January and February (up to around 2.1 mbd), though for China this is by no means enough. China’s oil imports from the Gulf, now trapped in the Strait of Hormuz, are at least double the amount imported from Russia (5.4 mbd through Hormuz to China).

In other words, in the short run, China still needs to deal with the consequences of the sudden shut-off of a good part of its oil imports at below market price, in the context of a jump in the oil price, which could easily hover around $100/barrel for a sustained period. Standard modelling of China’s sensitivity to oil prices points to a 0.5 percent GDP reduction for a 25 percent increase in oil prices (Rasmussen and Roitman, 2011). This illustrates the stakes for China.

Higher materials prices and higher crude oil prices are not price shifts which can be ignored.

Those higher prices translate directly into a very real risk of stagflation within the Chinese economy.

Please Support Independent Journalism

China’s Economy Still Underperforming

Regardless of what the narratives say, the data shows that China’s economy is still underperforming in many ways, and has only just begun to show improvement in some of them.

Although China’s official PMI gauge showed the manufacturing sector returning to expansion in March, that same gauge reminds us that China’s manufacturing sector has been in contraction for months at a time since the end of China’s bounceback from COVID Pandemic Panic lockdowns in 2021.

While China nominally turned in a quarter of strong GDP growth to start 2026, that same quarter saw China’s industrial capacity utilization falling to 73.6%, the lowest since the COVID Pandemic Panic lockdowns in 2020.

While new orders surged in March, for most of 2025 new orders were, like the rest of the manufacturing sector, contracting.

At the same time, export prices have been weakening for China since June of last year, when a steady export price rise ended and reversed.

The export picture was further darkened by slowing export growth, which resulted in China’s trade surplus abruptly narrowing to $51 Billion.

Domestically, retail sales growth continued to be sluggish, recording month on month growth of just 0.14% in March.

Year on year, retail sales growth slowed March to 1.7%, reiterating continued weakness in consumer demand.

For comparison, month on month US retail sales growth in March was also 1.7%.

The retail sales growth for an entire year in China is one month of expansion in the US.

At the same time, unemployment has been rising in China, reaching 5.4% in March.

These are not statistics which speak of economic strength and vitality. China’s economy is not in absolute collapse, but neither is it showing robust growth except on paper.

The weakness that has been the norm for the Chinese economy for the past few years means that price shocks such as the world is seeing now in energy can easily turn into a stagflation crisis of no growth coupled with high prices.

There has been a real risk of stagflation here in the United States. That risk has been even greater in China.

Please Support Independent Journalism

China’s Housing Woes Continue

No look at China’s economy is complete without observing that China’s housing bubble is still deflating, and China’s property developers are still struggling.

China Vanke, one of the largest developers still going—and one which had until last year appeared to have avoided the debt crises which sank many of its competitors—recently announced intentions to extend yet another bond issue, the fourth such debt extension it has sought since the start of the year.

There is no mystery why China Vanke has been repeatedly flirting with debt default: China’s housing markets are still in deep decline even after years of contraction. Residential property prices have been falling without interruption since the first quarter of 2022.

New home sales in China were the weakest for the month of March since at least 2022, charting uninterrupted year on year declines.

Housing starts were also the weakest year on year since 2022.

The consequence of these negative trends for Chinese housing culminates in steadily diminishing levels of property investment since 2022.

That housing markets are still in free fall even after three or four years not only demonstrates just how large the housing bubble was when it burst, it also illustrates just how much damage deflating that bubble will do in China.

The reality of the housing bubble for China is that its collapse represents what will ultimately be a cataclysmic level of wealth destruction among the rapidly diminishing Chinese middle class.

By far the most prevalent mechanism for wealth accumulation among ordinary Chinese has been real estate. As housing prices continue to fall, the value of real estate owned by individuals continues to erode.

If Beijing is serious about letting the bubble completely deflate without intervention, it will be forced to confront the literal destruction of the vast majority of wealth for China’s nascent middle class.

How China peaceably navigates those dangerous waters remains to be seen.

Please Support Independent Journalism

Demographics Are Still Destiny

The darkest of the clouds hanging over China’s economy remains its declining and aging population.

China continues to be hobbled with a lethally low fertility rate, the unintended consequence of the One Child Policy.

Not only is China’s population declining, the pace of that decline is arguably increasing, according to an analysis done recently by the US-based Rhodium Group, with increasingly immediate economic impacts.

Much has been written about the demographic headwinds to China’s economic growth. But these threats are typically portrayed as over the horizon, a problem for the next decade. The 2025 population statistics should force a rethink of those assumptions. What has long been described as a “gray rhino” risk—a palpable threat that is nonetheless ignored—appears to be charging sooner than expected. Last year China’s population declined by 3.4 million people, compared with a 1.4 million drop in 2024.

Within that decline, the more concerning development for economic growth was its concentration in developed coastal provinces. Migration inflows boosted population growth in eastern Chinese provinces to a greater extent than natural births.

The population decline, which has been ongoing for a number of years now, is accelerating.

China is losing population at an increasing rate.

Most alarming for China is that the population decline is the result of cultural shifts surrounding family planning and marriage. Fewer women are choosing to have babies, with even fewer opting to have more than a single child, even though the One Child policy was largely abandoned a decade ago. At the same time, Chinese couples are getting married later in life, with the average age of married people having risen to 34 years in 2024.

The increasing age of Chinese married couples, and the increasing age of Chinese mothers, results in another troubling phenomenon for China’s population: it is getting older.

China has more older people than it does younger people. That is going to be the demographic reality for at least the next few decades.

Rhodium Group cites these realities and concludes that China’s population is at a point where the word “collapse” is the word to use.

The immediate pressure on China, both economically and politically, is that the aging of the population is putting increasing pressure on the government to fund social security pensions.

But the demographic pressures on China’s fiscal balance are likely still underappreciated. In 2025, Beijing spent 2.9 trillion yuan to fill the deficit from the social security fund, accounting for 10.1% of last year’s general budget spending. The deficit is likely to widen further given the aging of the population. The dependency ratio (number of working people supporting one elderly person) was around 4.4 in 2024 but will fall to 3.5 people in 2030 and 2.8 by 2035, based on our calculations.

On the surface, the size of the social security fund grew another 1.5 trillion yuan last year to lift the total balance to 16.0 trillion yuan. But without the 2.9 trillion yuan in fiscal subsidies, the social security fund would have reported a deficit of 1.4 trillion yuan (about 11 years to deplete the current balance without assistance from fiscal subsidies). The largest hole within the social security fund is from the pension fund, with a total of 6.9 trillion yuan in spending in 2024 against 5.8 trillion yuan in income. The pension fund alone received 1.9 trillion yuan out of 2.6 trillion yuan in total fiscal subsidies.

The social security funding shortfalls also highlight another economic reality arising from China’s collapsing demographics: consumption decline.

Broadly speaking, young people tend to consume more than the elderly. Young people are where family formation typically takes place, and families drive consumption more than any other single factor in every society and culture.

Without a growing cohort of young people, China has zero chance of making meaningful improvements to its levels of domestic consumption, and zero chance of increasing the role domestic consumption plays in overall GDP.

China does not have a growing cohort of young people, and will not have a growing cohort of young people for the foreseeable future.

Please Support Independent Journalism

Still In Decline

The grim reality of China’s economy is that it is still very much in decline. The Q1 GDP growth metrics, to the extent China’s data can even be trusted, do little to alter that conclusion.

China is still plagued by excess capacity, able to produce more of just about anything than there is demand for that item. That excess capacity is a constraint on future economic growth, because it means China cannot simply grow by producing more.

Excess capacity is a primary reason China has been grappling with broad economic deflation for the past several years. China’s core economic dilemma is that it produces too much for the world to absorb.

Excess capacity is the primary factor suppressing export prices. Although China’s economic model emphasizes exports, it cannot export at scale without driving down prices. It cannot grow export volumes for most products without encouraging price deflation in those same products.

In a perverse irony given China’s large population, that excess capacity extends into the housing market. The extent to which China has overbuilt housing is demonstrated by month after month of falling home prices even has property investment and housing starts decline. The challenge facing developers such as China Vanke is how to improve the financial bottom line when market conditions demand that developers build less rather than more.

Yet for all China’s excess production capacity, China does not produce what ordinary Chinese both want and can afford to purchase. In order for China to make meaningful progress on increasing domestic retail sales, China has to produce goods and services Chinese customers demand and for which Chinese customers are able to pay. It currently is having zero success in doing so, as the stagnant retail sales data shows.

In broad strokes, excess capacity is still the economic imbalance at the core of China’s ongoing deflation. To that the war with Iran is now adding a series of material costs, as well as price and supply shocks.

While the price and supply shocks inject new cost constraints and are pushing prices up, the price increases are not the result of increased demand for goods and services. The emergence of factory gate inflation in China is due to supply constraints, not demand expansion.

That distinction matters, because when prices rise because of increased demand, the higher prices eventually limit demand growth, effectively keeping the demand and supply sides of the economy in approximate equilibrium. When prices rise because of constrained supply, which is what is happening currently in China, the new supply constraints mean that demand must drop to restore that same equilibrium. China is already grappling with inadequate levels of demand for its economic production capacity, and the price shocks from the war with Iran are likely to push demand levels down even lower. That is the exact opposite effect from what China wants to see.

As in the United States, one month of factory gate inflation and materials price shocks does not automatically mean a stagflation crisis for China. That one month of price shocks, however, does mean all the ingredients are in place for a stagflation crisis. Whether China finds itself grappling the same sort of collision of inflationary and deflationary pressures that tortured the US in the 1970s remains to be seen, the longer materials prices remain elevated compared to pre-war levels, the more a 1970s-style stagflation crisis is likely to take shape within the Middle Kingdom.

The closure of the Strait of Hormuz is causing dislocations across the whole of the global economy. Europe is not immune. The United States is not immune. China is not immune. Contrary to many prevailing narratives, China is proving quite vulnerable to those dislocations.

The outcome of the war with Iran is going to determine how much and how fast China’s economy goes from bad to worse.

Please Support Independent Journalism

Through the fog, however, one point has always been absolutely clear: the closure of the Strait of Hormuz is a major disruptor in the world economy, and the effects are already being felt worldwide.

Retail fuel prices were the most obvious and most immediate effect, with nearly every country experiencing a price surge on par with the 2022 hyperinflation cycle. In the US gasoline and diesel prices surged by more than $1 and $1.50 per gallon, respectively from the start of the war. Germany saw retail diesel prices climb by €0.59 per liter (€2.23 per gallon) by the beginning of April, and gasoline price rise by €0.36 per liter (€1.36 per gallon). Even early in March, before the full impact of the closure of the Strait of Hormuz had been felt in energy markets, China raised its gas and diesel prices by 695 yuan and 670 yuan per metric ton.

If a product is related in any way to petroleum and fossil fuels, its price has risen significantly, with percentage price increases in double digits across the board.

China, the world's leading importer and a growing chemicals exporter, is quite possibly the country feeling the greatest impacts from these price surges. Every price hike is a cost increase to China’s manufacturing intensive, export oriented economy.

This war is between the US and Iran, yet the biggest winner or the biggest loser could very well be China, nominally a neutral nation and not a party to the conflict.

Please Support Independent Journalism

Iranian Hypocrisy Over The Strait Of Hormuz

That China raised fuel prices almost immediately after the start of the war gets right to the heart of the perverse irony over Iran’s illegal and hypocritical stance regarding the Strait of Hormuz. By closing the Strait, Iran sent a massive inflation pulse into the economy of its main customer.

China accounts for at least 80% and perhaps more than 90% of Iran’s pre-war oil exports. All those exports were at least disrupted when Iran closed the Strait.

Yet at least publicly, Iran seems unaware of its role in this. Instead, the current leadership atop the regime of Supreme Leader Mojtaba Khamenei, including Parliament Speaker Mohammed Bagher Ghalibaf, fatuously point a finger of blame at the United States, such as Ghalibaf did with his usual bellicosity yesterday.

Even Iran’s Foreign Minister, Abbas Araghchi, seemed oblivious to the double standard Iran advances with its accusations against the United States.

Iran accusing the US of “warmongering” in the Strait is, of course, absurd. The US is not the nation that told ships they could enter the Strait, only to fire on them. That was something Iran did on April 18.

For all of Iran’s pretentious accusations against the United States, there is no dispute which nation closed the Strait of Hormuz. Iran did.

There is also no dispute that closing the Strait of Hormuz is a violation of international law. The United Nations Convention on the Law of the Sea (UNCLOS) explicitly declares in Article 38 a right of transit passage through all such waterways.

In straits referred to in article 37, all ships and aircraft enjoy the right of transit passage, which shall not be impeded; except that, if the strait is formed by an island of a State bordering the strait and its mainland, transit passage shall not apply if there exists seaward of the island a route through the high seas or through an exclusive economic zone of similar convenience with respect to navigational and hydrographical characteristics.

Article 44 further restrains states bordering these international water ways from restricting or regulating traffic through them.

States bordering straits shall not hamper transit passage and shall give appropriate publicity to any danger to navigation or overflight within or over the strait of which they have knowledge. There shall be no suspension of transit passage

Nor is this simply my interpretation. Singapore’s Foreign Minister Vivian Balakrishnan argued substantially the same points during an appearance at CNBC’s CONVERGE LIVE event on April 22.

“With respect to both America and China, we have told both of them we operate on the basis of UNCLOS,” he said, referring to the United Nations Convention on the Law of the Sea.

Article 44 of UNCLOS states that “States bordering straits shall not hamper transit passage ... There shall be no suspension of transit passage.”

“The right of transit passage is guaranteed for everyone. We will not participate in any attempts to close or interdict or to impose tolls in our neighborhood,” Balakrishnan said.

Prevailing legal opinion also does not give Iran any grace on the matter. UNCLOS is to ensure freedom of navigation through the world’s strategic waterways, and Iran is determined to prevent freedom of navigation in the Strait of Hormuz. These positions are not legally compatible.

We should pause to note that neither the US nor Iran have ratified UNCLOS, although Iran has signed the Convention, and the US separately agrees with many of the principles contained therein. While neither the US nor Iran is technically bound by UNCLOS as they would be had they fully ratified the treaty, there is no serious argument to rebut the understanding that both countries are in broad agreement with UNCLOS’ position on freedom of navigation, which Iran’s Strait closure unquestionably violates.

If Iran actually espoused the freedom of navigation principles of UNCLOS, the Strait of Hormuz would never have closed and this situation would never have come to pass.

Please Support Independent Journalism

China In The Middle

Iran’s hypocrisy and blatant treachery in the Strait of Hormuz is arguably a complicating factor for a country such as China.

On paper China is an ally of Iran. It presumably helped rebuild and rearm Iran’s defenses after the Twelve Day War last summer.

At the same time, China also is nurturing good diplomatic relations with the other nations in the Persian Gulf, and just recently, in a phone call with Saudi Crown Prince Mohammed bin Salman, openly endorsed freedom of navigation in the Strait.

Xi said that the normal passage through the Strait of Hormuz serves the common interests of regional countries and the international community, adding that China supports regional countries in building a common home marked by good-neighborliness, development, security and cooperation, mastering their own future and destiny, and promoting long-term peace and stability in the region.

As I noted a few days ago, such stances could indicate China was losing patience with Iran’s intransigence over the Strait.

It is worth noting that “normal passage” arguably refers to the pre-war status quo in the Strait, which did not include Iran assessing tolls on ships passing through it. Such tolls are, of course, an explicit violation of the UN Convention on the Law of the Sea, which codefied pre-existing international understandings on the principles of freedom of navigation.

It is also worth noting that China buys oil from more than just Iran, and its shipments of Saudi crude are down 10% from pre-war levels.

Shipping data from multiple sources indicates China’s normal imports of Persian Gulf oil have been disrupted to a significant degree, even if they haven’t been completely cut off.

Interestingly enough, China may also be turning the war and the closure of the Strait of Hormuz into a short-term revenue generator, exploiting arbitrage opportunities that have emerged thanks to the surge in benchmark oil prices and selling out of its strategic petroleum reserve while the prices are high.

“What has been happening in the last two or three weeks is actually they have been aggressively selling crude oil,” Mercuria CEO Marco Dunand said at the FT Commodities Global Summit in Lausanne on Tuesday. “They’ve taken out a lot of demand from various countries and offered aggressively in tenders.”

Dunand said there are a variety of possible explanations for the selling. They include the release of oil inventories within China, continued sales of Iranian oil in the weeks after the war started, and possible optimism that the Strait of Hormuz would reopen quicker than it has so far.

China is a net importer of oil, which means it cannot continue to sell its oil inventories indefinitely. Marco Dunand estimates China can continue to sell crude out of its reserves for another three weeks, after which it needs to recalibrate its strategy should the blockade of the Strait still be in effect at that time.

Ironically, that three week endpoint is also about the time frame when Iran’s inability to export oil starts to have outsized effects. Because Iran is unable to export the same volume of oil it has in the past, its available storage capacity is starting to fill up. Analysts at JPMorgan project that Iran will exhaust their storage capacity sometime in the next three weeks.

Onshore storage sits around 86 million barrels, currently just over half full at roughly 47 mb. That leaves about 40 mb of working capacity, which, in market terms, translates into roughly 22 days of export cover if flows are fully choked off. Layer in the four Iran-linked VLCCs still sitting inside the Strait of Hormuz, and you add another 8 mb of potential floating relief, stretching that window toward 26 days.

But the system does not wait for tanks to hit the brim before reacting. Production does not fall off a cliff, it bends under pressure. In practice, upstream adjustments begin earlier and build progressively. The rule of thumb embedded in the JPM framework is that Iran would need to start trimming output after roughly 16 days of a full export blackout, with curtailments accelerating from there until they converge toward full export volume shut ins, around 1.9 mbd, closer to day 30.

Day 1 of that “full export blackout” arguably is when President Trump announced the US blockade of Iranian ports (but not the Strait itself) on April 12. As of this writing, 10 of JPMorgan’s 16 days have already elapsed, leaving only 19 days until Iran hits the full export volume shut in point at day 30.

When wells are shut in, pressure build-up and other environmental forces can damage them, either permanently reducing their daily output or requiring significant overhaul upon reopening to restore the wells to previous production levels.

If the JPM estimate is correct, if Iran has to start shutting in wells starting sometime next week, and if Marco Dunand’s assessment of China opportunistically selling down its oil inventories is correct, in about three weeks a second and longer lasting oil supply shock hits all major economies, and especially China. Removing China’s oil sales and Iran’s oil production for the foreseeable future would be a double-digit percentage loss of current oil production globally.

China is exploiting its geopolitical position between the US and Iran for maximum short-term revenue, but that maneuver could hamper its long-term position should the Strait of Hormuz continue to be blockaded at least by the United States. By the time China needs its strategic inventory, it will have already depleted at least a portion of that inventory.

Please Support Independent Journalism

China’s Petrochemical Shock

As I discussed last week, China is experiencing at least one major supply shock in the form of sulfur and sulfuric acid.

What tripped media concerns over sulfuric acid was China’s recent announcement, first reported on April 10, that it is suspending exports of sulfuric acid, owing to shortages within its own industries.

Particularly relevant is China’s apparent justification for the export ban: it needs to conserve the chemical for its own supply chains and manufacturing industries.

While sulfur prices have come down some for China, relative to pre-war pricing China is still paying 55% more than before.

Yet it is not merely for sulfur and sulfuric acid that China has seen tremendous price surges.

Polyethylene prices have surged nearly 20% since the war began, and at one point flirted with a 40% increase.

Styrene has risen some 30% since the war began, and initially had surged by just over 50%.

Bitumen is currently sitting at just under a 25% increase, after touching 40% towards the end of March.

China is a major consumer of all three industrial chemicals, and many more besides. These chemicals are all refined products from various crude oils. China either imports the crude and refines these compounds itself, or it imports these compounds from a number of countries, including those in the Persian Gulf.

China’s reliance on not just imports of crude oil but also imports of petroleum refined products is also being thrust into the spotlight by the awkward reality that China is importing record volumes of ethane from the United States as a result of the war and the Strait of Hormuz being closed.

Shipments of US ethane are expected to rise to an all-time high of 800,000 tons in April, according to Chinese consultant JLC, which would be around 60% higher than the monthly average. Some companies can switch to using ethane, helping them offset disruptions to the supply of naphtha and liquefied petroleum gas from the Middle East after the effective closure of the Strait of Hormuz.

Ethane is one of the minor fractions of natural gas and a by-product of liquified natural gas (LNG) production. When Iran targeted Qatar’s LNG production facilities at Ras Laffan early on in the war, forcing Qatar to shutter most of the facility, nearly 20% of world LNG supply was removed. One of the other products Ras Laffan produced was ethane.

While prices of US ethane have overall fallen since the war began, in recent days the prices have begun climbing again.

China’s need is clearly the United States’ gain when it comes to ethane.

Equally clear is that China is experiencing multiple price and supply shocks, all of which directly impact the vital export sector of China’s economy. The goods China produces to sell overseas are getting considerably more costly to manufacture, at least in the short run.

On the surface, these price shocks arguably look like good news. The scarcity and resultant price surges has caused China’s Producer Price Index to show positive growth for the first time literally in years.

While the emergence of even some factory gate inflation in China is arguably a relief, given the deflation that has hung like an albatross around China’s economic neck in recent years, a sudden energy inflation shock, if it endures over time, can produce what some “experts” want to call “bad inflation” but is really stagflation.

Just as it is in the United States, stagflation for China is when a price shock collides with a moribund economy.

Is China about to have its deflation crisis compounded with a stagflationary shock? Much depends on how long the Strait of Hormuz remains closed and energy prices elevate.

No matter how long the Strait remains closed, China remains very much in the middle between Iran and the United States in this war, and the two countries’ dueling blockades suggests being in the middle means China gets run over from both directions.

Please Support Independent Journalism

Crisis Or Opportunity?

In some narratives, the war with Iran represents an opportunity for China. Not only is its economy getting a long-desired boost on inflation, but rumors of Persian Gulf countries attempting to sidestep Iranian interdiction of their cargoes by trading in yuan rather than dollars persist. Broadening the utility of the yuan in global commerce is seen by many as an essential step in “de-dollarization”.

In other narratives, China is getting hammered by price and supply shocks, stressing an already distressed economy. That stress is seen as a likely catalyst for what appears to be a rise in social unrest, although the extent and impact of that unrest is difficult to ascertain.

What is certain is that China is significantly impacted by the war with Iran, and not in demonstrably good ways. As a rule, price and supply shocks are not considered to have a positive impact on a nation’s economy. China is experiencing multiple price and supply shocks as a result of the war, and will continue to experience those multiple price and energy shocks.

Much of the data surrounding those shocks supports the stress narrative: Youth unemployment rose in March, along with regular unemployment, suggesting the producer price rise has not yet been accompanied by any significant job creation. Labor costs continued to rise in March, extending a trend reversal from a years-long decline that produced a record low in June of 2025.

Weak or no job growth is one sort of sub-par economic indication which sets up the context for a stagflation scenario to unfold. Just as in the US, we cannot yet conclusively describe current economic conditions in China as “stagflation”, but there is little doubt that China, already mired in deflation, is at elevated risk for stagflation.

Whether that is what evolves in China’s economy depends entirely on the duration of elevated energy prices, which in turn hinges on when and how the Strait of Hormuz is finally reopened.

That is one of the outcomes we know will happen eventually. The Strait of Hormuz will reopen for the simple reason that, with 20% of the world’s oil supply flowing through it, the world economy cannot abide it being closed indefinitely.

Similarly, we know there will be talks. No matter which scenario one espouses for the war with Iran, every scenario ends with the principals sitting down at a negotiating table.

What we still do not know is what the agenda for those inevitable talks will be. Both sides reject the talking points of the other, making formal negotiations difficult.

We also do not know when the Strait itself will be reopened. If there are talks soon, there is at least a chance the Strait will be reopened soon. Reopening the Strait is a prerequisite for getting energy prices back towards pre-war levels; the longer the Strait is closed the more energy prices are likely to trend up and not down.

The longer the Strait is closed the more China is compelled to draw down its strategic petroleum reserves.

The longer the Strait is closed the greater the likelihood Iran’s oil production will suffer a major quasi-permanent reduction. Given that China has been buying the bulk of Iran’s oil production, the loss of Iranian production means China has to replace relatively low-cost Iranian oil with more expensive market-priced crudes.

That last point would mean that China is facing increased oil prices no matter how the war with Iran turns out. An energy price shock could become permanent higher energy prices for China. That would not be a positive outcome for China’s economy.

The fog of war makes any sort of prediction about the outcome of this war problematic. We simply do not know how this war ends. While the United States arguably has already won the war from a military perspective, having smashed most of Iran’s military assets, geopolitical victory has not yet been achieved.

This war could end with China among the countries with enhanced geopolitical power and influence.

This war could also end with China as well as Iran losing geopolitical power and influence to the United States. If President Trump succeeds in de-nuclearizing Iran and forcing the Khamenei regime to abandon pursuit of nuclear weapons, that would be an indisputable geopolitical victory for the US, and a corresponding setback for China, which likes to position itself as America’s principal geopolitical adversary.

This war could end with China’s economy enduring more significant shocks and body blows than the US economy. China may already be enduring more economic shocks and body blows than the US—the data certainly compels us to entertain that possibility. Those shocks and body blows may even put China into a final economic death spiral which will stress Chinese society past the breaking point—China’s pre-existing economic weaknesses make that a very real possibility.

Will China number among the winners or the losers when this war with Iran finally does end? It is too soon to answer that question with any finality, but the data we have to date does not favor China emerging from this war better off than before.

Please Support Independent Journalism

Cynics scoff at such ideals. Skeptics question the integrity of the men who acted on that principle in 1776.

Progressives deride both the principle and the men who acted upon it as venal and vicious, and seek to replace both at the core of our government and the core of our society.

In an April 15 lecture delivered at the University of Texas, Justice Clarence Thomas eloquently reminds us that our nation’s founding principle is still relevant, still foundational, and still worth defending.

He reminds us that the progressive “elites” in this country, expropriating a rubric of virtue, oppose this principle and want to dismantle the government founded upon it.

I could not hope to add to what Justice Thomas said. Instead, I share his thoughts in their entirety.

Please Support Independent Journalism

Justice Thomas’ UT Address

SUPREME COURT ASSOCIATE JUSTICE CLARENCE THOMAS: President Davis, Provost William Inboden, Dean Dyer, faculty, students, and honored guests, I thank each of you for being here. And I thank the school and the officials here for the invitation to visit the University of Texas at Austin.

My wife, Virginia, and I are pleased to be here. To celebrate the 250th anniversary of the Declaration of Independence. If my memory serves me, this is only my second visit to the University of Texas.

And this is the first visit at the invitation of the university. But I have hired and worked with a number of outstanding young people associated with this university. My first was now Chief Judge Greg Maggs of the U.S. Court of Appeals for the Armed Services, who was a fairly new faculty member at the law school when I became a member of the court. He took a leave of absence to help me as a law clerk during the second half of my first term. My first UT graduate to serve as a law clerk was Greg Coleman three decades ago. Greg went on to become the first solicitor of the state of Texas.

He was simply outstanding, as was his son, Reed, who also was a graduate of the law school here, and who was equally outstanding. Greg’s widow and our very dear friend, Stephanie, is with us today. Stephanie, thank you, and thanks for being such a good friend.

And both Greg and his son, Reed, clerked for my dear friend, Judge Edith Jones, also a graduate of UT Law School. I greatly admire Judge Jones. She is one of my heroes, and I admire her as a person and as a jurist.

And I’m grateful that she can be here today. A number of my former clerks are also here. I can’t tell you which ones, so let me ask them to stand to be recognized.

So in my chambers, UT and UT Law School are very well represented. I hope—I’m having a little trouble with this, getting used to the podium, sorry about that— I hope that my talk today will help in some small way to inaugurate another great initiative, the State of Texas’ plan to restore the teaching of civics and Western civilization to a central place in its flagship university. And I am grateful and honored to have been invited by Justin Dyer, the dean of the new School of Civic Leadership.

I’m also grateful for the assistance of my former law clerk, Professor John Yu, who has spent the last three decades at Berkeley Law School, but is now joining Justin and his team here at the University of Texas. The school’s stated mission is to help students encounter the distinct inheritance of Western civilization and the American constitutional tradition as part of a larger quest for wisdom about how to live and how to lead. Your plans could not come at a more important moment for our nation, when as we celebrate the 250th anniversary of the Declaration of Independence, the very values announced in it have fallen out of favor.

It is my sincere hope that your work to revitalize the teaching and research of Western civilization and the American constitutional tradition will lead the way in the reform of our nation’s colleges and universities. And I hope that your example will help to rejuvenate our fellow citizens’ commitment to the principles of the Declaration of Independence. I seem to always enjoy my travels to this amazing state.

My wife, Virginia, and I have many wonderful friends and acquaintances here. And it is so special to have our dear friends Harlan and Kathy Crow join us today. One of the features of this state that stands out in a way that Texans talk about it, what comes through is the sustained and sustaining affection that they have for their home state.

That reverential feeling for and attachment to Texas is to be respected and admired, and if possible, emulated. This affection is similar to the attachment that I grew to have for my home state of Georgia, and certainly for our country, despite the indelible mark of segregation and its companion evils. I was proud to say that I was American by birth and Georgian by the grace of God.

It was not uncommon to hear others openly proclaim their allegiance to God and country. At our grammar school, St. Benedict’s, we started each school day by lining up two by two and class by class in the schoolyard to watch the raising of our flag and to say the Pledge of Allegiance before silently marching to our respective classrooms. Even as so much of our God-given and constitutional rights were denied us, we still faithfully said the Pledge of Allegiance, memorized the preamble to the Constitution, and yearned for the fulfillment of its promised ideals.

Sadly, these sentiments are not as widely shared among our fellow citizens today, and they certainly do not seem to have that sustaining strength that they had back then. In fact, all too often the sentiments tend toward cynicism, rejection, hostility, and animus toward our country and its ideals. With the foregoing in mind, I would like to begin by addressing my first encounter with the principles of the Declaration of Independence.

It is perhaps not what you would immediately think. The second paragraph of the Declaration proclaims, We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights. Throughout my youth, these truths were articles of faith that were impervious to bigotry and discrimination.

The American Heritage Dictionary of English Language defines self-evident as obviously true and requiring no proof, argument, or explanation. Whether they had a divine source or a worldly one, they were never questioned. They were the Holy Grail, the North Star, the Rock, immovable and unquestioned.

Despite the multiplicity of laws and customs that wreaked a bigotry, it was universally believed among those blacks with whom I lived and who had very little or no formal education that in God’s eyes and under our Constitution, we were equal. This was also the case with my nuns, most of whom were Irish immigrants. At home, at school, and at church, we were taught that we are inherently equal, that equality came from God, and that it could not be diminished by man.

We were made in the image and likeness of God. That proposition was not debatable and was beyond the power of man to alter. Others with power and animus could treat us as unequal, but they lacked the divine power to make us so.

Somehow, without formal education, the older people knew that these God-given or natural rights preceded and transcended governmental power or authority. When you lived in a segregated world with palpable discrimination and the governments nearest to you enforced laws and customs that promoted unequal treatment, it was obvious that your rights or your dignity did not come from those governments, but rather from God. Though not a literate man, my grandfather often spoke of our rights and obligations coming from God, not from architects of segregation and discrimination.

Men were not angels. They were subject to the constraints of antecedent rights, and we were not subject to those men, even as we were subjected to their whims. We knew that life, liberty, and property were sacrosanct.

Those truths were self-evident to the adults in our lives and were taught to us as indelible, undeniable truths. Those around us would endure or could endure the insults of segregation with dignity because they knew that in God’s eyes, they were equal. All too often, there is an unfortunate tendency when discussing the Declaration to make these self-evident truths and first principles of government obscure.

Intellectuals want you to believe that our founding principles are matters of esoteric philosophy or sophisticated debate. Even those who support them too often talk about them as if they were academic playthings. They overcomplicate them, take the spirit out of them, and discuss them in a way that puts us to sleep.

But the principles of the Declaration of Independence, as I encountered them, are a way of life. They are not an abstract theory that you only learn in college or law school, but the basic premises of our Constitution and government that you can learn from the people all around you. When Alexis de Tocqueville visited early America from France, he was struck that there was no country in the civilized world where they were less occupied with philosophy than the United States.

But there was likewise no country where the principles of the Declaration were more deeply ingrained or more fiercely defended than those same United States. That is the sense in which I knew the principles of the Declaration in my childhood. That is the only sense in which those principles can sustain our country.

And that is the sense in which I will speak to you about those principles today. I believe now, as I did then, that the Declaration of 1776 provides us with the principles to guide us as citizens of our republic. Even in this time of questioning and criticism of our founding, we should not forget that the Declaration established the principles that produced, despite all of our imperfections, our miscues, and our tragic mistakes, it gave us the freest, wealthiest, and most powerful nation in the history of the world.

It provided the moral principles by which Frederick Douglass, Abraham Lincoln, and Martin Luther King would criticize the institutions of slavery and segregation. The Declaration is, in fact, along with the Gospels, one of the greatest anti-slavery documents in the history of Western civilization. It did not establish a form of government.

That was the work of the Constitution that followed. But it stated the purpose of government. The Declaration made it clear, in clear prose, that the purpose of government is to protect our God-given, unalienable rights, rights that all individuals equally possess.

As Abraham Lincoln declared in 1858, in the midst of his great debates with Stephen Douglass, quote, drop every paltry, insignificant thought for any man’s success. It is nothing. I am nothing.

Judge Douglass is nothing. But do not destroy that immortal emblem of humanity, the Declaration of American Independence. The ideas of the Declaration are so powerful that our nation could not coexist with the contradiction created by the great evil of slavery.

Those principles were so powerful that hundreds of thousands of Americans fought and died in the Civil War to make men free. Those ideas have been so powerful that they convinced our nation to finally end segregation. They continue to be so powerful today that they have inspired people throughout the world to throw off the shackles of their own oppressors.

And it all began with our founders declaring in 1776, in the Declaration of Independence, that we hold these truths to be self-evident, that all men are created equal, and that they are endowed by their creator with certain unalienable rights, that among these are life, liberty, and the pursuit of happiness. We should also not forget the important sentence that follows, that to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed, that to secure these rights, governments are instituted. The principle of consent follows from the principle of equality.

We the people can never legitimately consent to the violation of our God-given equality. However, when I encounter the Declaration of Independence anew today, I am most struck by the final sentence. It can be easy to forget, 250 years later, the courage it took for those 56 men to sign the Declaration.

Arguably, those men committed treason against the king, risking death at the hands of an empire far mightier than the newborn United States. They thus concluded with the memorable final sentence, and I quote, and for the support of this declaration, with a firm reliance on the protection of divine providence, we mutually pledge to each other our lives, our fortunes, and our sacred honor. I will say it again.

We mutually pledge to each other our lives, our fortunes, and our sacred honor. Recently, I came across a definition of courage that is attributed to President Franklin Delano Roosevelt. And courage is not the absence of fear, but rather the assessment that something else is more important than fear.

In essence, the signers of the Declaration were saying that they were willing to die for the principles they were asserting, the supreme act of courage. Those principles were more important than their fear. Nothing in the Declaration of Independence, I now realize, matters without that final sentence.

Without that sentence, the rest of the Declaration is but mere words on parchment paper. Nice words, but nonetheless, just words. What changed the world was not the words, but the commitment and spirit of the people who were willing to labor, sacrifice, and even give their lives what Lincoln and Gettysburg call the last full measure of devotion for the Declaration’s principles.

It is that devotion to which we owe our rich inheritance. It was that devotion that sustained the Founding Fathers and the Continental Army as they fought and won the Revolutionary War, braved the winter at Valley Forge, crossed the Delaware, and defeated an army, many times their number and firepower, to win their freedom. It was that devotion that Nathan Hale expressed when, before being executed by the British, he reportedly said, I only regret that I have but one life to give for this country.

It was that devotion that Patrick Henry invoked when he stood before the Virginia Convention and asked, Is life so dear or peace so sweet as to be purchased at the price of chains and slavery? Forbid it, Almighty God. I know not what course others may take, but for me, give me liberty or give me death.

That devotion has driven the great achievements and heroism of Americans in the 250 years since. Think of the frontiersmen who settled the West. Think of the families who built their little towns on the prairies.

Think of the women who raised their children to love God and country and sent them off to fight wars. Think of the soldiers on the battlefields of the Civil War who sang, As he died to make men holy, let us die to make men free. Think of the innovators and laborers and engineers who Tocqueville observed were so infused with the patriotism that they felt every triumph for their country as a triumph in their personal lives.

Think of how the devotion carried us from Independence Hall to Flanders Field and to the beaches of Normandy. Think of the memorable scene in the Band of Brothers when the American soldiers arrived at a concentration camp, saw the suffering, emaciated, desperate prisoners, unlocked the gates and gave them food and blankets and warm embraces. The soldiers looked around and knew in their hearts that this is why we fight.

Think of the passengers of Flight 93 that crashed in Skanksville, Pennsylvania on 9-11 or the young men and women whom we send in harm’s way even as we sit here today. Think of my grandparents who heroically, quietly, without fanfare sat my brother and me down at the kitchen table in August of 1955 and committed the rest of their lives to us so that we could have a chance. They told us, we don’t have no education.

We don’t have no education and no chance, but you boys are going to have a chance. But we’re going to devote the rest of our lives to you boys. It was their devotion, their love, their dedication to raising us right that has made the difference, not the words, though the words expressed as best they could what they intended to do.

Their devotion is what mattered. Similarly, it is the devotion expressed in the final sentence of the Declaration, the willingness to do anything for our principles that has throughout American history been most indispensable. It is that devotion that we are missing today and that we must find in our hearts if this nation is to endure.

I arrived in Washington, D.C. 47 years ago. It’s hard to believe. I arrived as a staffer for Senator Jack Danforth of Missouri in 1979, telling myself that the job on Capitol Hill would be a short stop on my way home to Savannah, Georgia.

I then joined the executive branch during the Reagan administration, served in two federal agencies for nearly a decade, served as a judge on the Federal Court of Appeals, and have for the past 34 years served on the Supreme Court. Since the day I arrived in Washington, there was never a shortage of people espousing noble purposes, saying all the right things. All around me there have been people full of promises, claiming a commitment to some righteous cause, to traditional morality, to national defense, to free enterprise, to religious piety, or to the original meaning of the Constitution.

These people can be just as high-minded as the men who signed the Declaration. They can mouth the words of the Declaration and parrot its principles. They can write essays and talk at conferences about the Declaration with the best of them.

All too often, however, this was but lip service, camouflaged by grand theories in the tall grass of big words and eloquent phrases. What seemed to be lacking, however, was that devotion. People gain positions of authority, and you learn who they really are.

To paraphrase something I recently read, combat strips us down to our essentials. Once in the spotlight, in that combat, many people fall prey to the lures that are set up to turn them away from their previously untested principles. They become petrified by criticism, so fearful of negative attention that they find ways to avoid doing the right thing.

Or they fall prey to the enchanting siren songs of flattery and become so bewitched by praise that they will desperately seek to conform accordingly. They are enticed by access to things that were previously unavailable to them. They get so swept up in the euphoria of acclamation and acceptance that they put aside their convictions.

They water down their message, negotiate against themselves, vote against their principles, and hide in the tall grass. They recast themselves as institutionalists, pragmatists, or thoughtful moderates, all as a way of justifying their failures to themselves, their consciences, and their country. It did not take me long in Washington to stop wondering why the Supreme Court took 60 years to overrule Plessy v.

Ferguson, the 1896 decision that endorsed government-enforced racial segregation and validated the Jim Crow South that I grew up in. It could not possibly have taken my court 60 years to know that Plessy was a hideous wrong and that racial discrimination was grossly incompatible with our colorblind Constitution. The justices must have known it all along.

The right thing to do, as Justice Harlan spelled out in his lone dissent, was obvious, as it so often is. Perhaps what stood in the way was cowardice. The justices may have been afraid of the societal consequences.

They may have been afraid of coming under political fire. They may have been afraid of losing their social standing. They may have been afraid of bad press.

They could have been concerned that if they began to enforce a colorblind Constitution, they would have to address interracial marriage next. But in any case, for 60 disgraceful years, they made American children like me grow up in a racial caste system because it was easier to do nothing than to do the right thing. When Americans look to Washington and wonder why it is so often disappointed, it is not because there are too few people who know what is right.

It is not because we lack the intellect or the capacity or the talent. It is instead because there are too few people who are willing to do what it takes to do the right thing, to sacrifice the popularity, flattery, comfort, and security that are the purchase price for principle. It is because too few of us reflect on and reflect the courage and commitment of that final sentence of the Declaration.

And so many seem to have forgotten how much others have sacrificed so that this nation could exist and endure. I will state this more poignantly. Do any of us have what it took for our young soldiers to storm Normandy Beach, to fight at Guadalcanal, to later fight at Chosin Reservoir?

If we can’t say that we have the courage required of these young soldiers in battle to defend our founding principles, then how do we preserve these principles and this republic? Until we have a devotion that matches the courage of those who made this country possible, I doubt, I seriously doubt any amount of study or development of insights about our Constitution will make much difference. There is a world of difference between what it takes to score academic points and what it takes to protect and defend the Constitution as we are sworn to do.

I have faced this struggle myself. About 43 years ago, in the early spring of 1983, I was the lowest point in my life. I had just buried both of my grandparents, the man and woman who raised me, and the two greatest people that I have ever known.

I was broke. I was living in and nearly evicted from a cockroach-infested apartment. I could not pay my credit card bills on time.

I would soon sell my car to pay my son’s tuition. I was being constantly attacked by the media and Congress because as chairman of the Equal Employment Opportunity Commission, I did not bow to the then prevailing orthodoxy on race. At that point, I asked myself a simple question.

What are your principles worth to you? My answer then was the same I would give today. It is worth, they are worth, life itself.

What are those principles? They are the same principles in the Declaration. They were bequeathed to me by my grandparents and reinforced by my nuns and my faith.

In God’s eyes, we are equal. We are all equally created in the image and likeness of God. We are all endowed with the natural rights to life, liberty, and happiness.

Our rights and our dignity are inherent. They do not come from others, and they do not come from the government. And our government derives its legitimacy and its authority from our consent.

We do not derive our rights from our government. The primacy of our rights in relation to our government is crucial in reconciling the immortal words of the Declaration with our Constitution and our history. None of our rights come from the government.

All of the government’s authority comes from our consent. And the structure and limited role of government is to assure that it does not exceed the authority to which we have consented or intrude on our natural rights. The Constitution is the means of government.

It is the Declaration that announces the ends of government. The Constitution achieves this purpose by protecting our natural rights and our liberties from concentrated power and excessive democracy. Our Constitution creates a separation of powers and federalism, truly for the first time in modern history, to prevent the government from becoming so strong that it threatens our natural rights.

Federalist No. 10 proposed the idea that the great threat to our rights comes from the majority faction. Human history teaches us, alas, that numerical majorities frequently seek to control government and use the state to violate rights of the minority.

Because man has fallen, and the desire for power was, as James Madison described it, sown in the nature of man, government had to be limited. For as Madison also said, if men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary.

But, alas, men are not angels. The slaveholders used the power of government to deny the fundamental rights, natural rights, of the slaves. The segregationists used the state to oppress the freed men and women, including my ancestors.

As we meet today, it is unclear whether these principles will endure. At the beginning of the 20th century, a new set of first principles of government was introduced into the American mainstream. The proponents of this new set of first principles, most prominent among them, the 28th president of our country, Woodrow Wilson, called it progressivism.

Since Wilson’s presidency, progressivism has made many inroads into our system of government and our way of life. It has coexisted uneasily with the principles of the Declaration. Because it is opposed to those principles, it is not possible for the two to coexist forever.

Progressivism was not native to America. Wilson and the progressives candidly admitted that they took it from Otto von Bismarck’s Germany, whose state-centric society they admired. Progressives like Wilson argued that America needed to leave behind the principles of the founding and catch up with the more advanced and sophisticated system of relatively unimpeded state power, nearly perfected.

He acknowledged that it was a foreign science speaking very little of the language of English or American principle, which offers none but what are, to our minds, alien ideas. He thus described America still stuck with its original system of government as, quote, slow to see the superiority of the European system. Progressivism was the first mainstream American political movement, with the possible exception of the pro-slavery reactionaries on the eve of the Civil War, quote, to openly oppose the principles of the Declaration.

Progressives strove to undo the Declaration’s commitment to equality and natural rights, both of which they denied were self-evident. To Wilson, the unalienable rights of the individual were, quote, a lot of nonsense. Wilson redefined liberty, not as a natural right attendant and assedent to the government, but as, quote, the right of those who are governed to adjust government to their own needs and interests.

In other words, liberty no longer preceded the government as a gift from God, but was to be enjoyed at the grace of the government. The government, as Wilson reconceived it, would be, quote, beneficent and indispensable. Progressives such as John Dewey attacked the Framers for believing that their ideas were immutable truth, good for all times and places, when instead they were, according to him, historically conditioned and relevant only in their own time.

Now Dewey and the progressives argued those ideas are to be displaced. Progressivism seeks to replace the basic premises of the Declaration of Independence and hence our form of government. It holds that our rights and our dignities come not from God but from government.

It requires of the people a subservience and weakness incompatible with a constitution premised on the transcendent origin of our rights. You will not be surprised to learn that the progressives had a great deal of contempt for us, the American people. Before he entered politics, Wilson would describe the American people as, quote, selfish, ignorant, timid, stubborn, and foolish.

He lamented that we do too much by vote and too little by expert rule. He proposed that the people be ruled by administrators who use them as tools. He once again aspired to be like Germany, where the people, he said admiringly, were docile and acquiescent.

The century of progressivism did not go well. The European system that Wilson and the progressives scolded Americans for not adopting, which he called nearly perfect, led to the governments that caused the most awful century that the world has ever seen. Stalin, Hitler, Mussolini, and Mao all were intertwined with the rise of progressivism and all were opposed to the natural rights on which our declaration are based.

Many progressives expressed admiration for each of them shortly before their governments killed tens of millions of people. It was a terrible mistake to adopt progressivism’s rejection of the declaration’s vision of universal, unalienable natural rights. Wilson’s claim that natural rights must give way to historical progress could justify the greatest mistake in our history.

In Plessy v. Ferguson, my court upheld Louisiana’s system of racial segregation because, quote, separate but equal, it observed, was reasonable in light of the established usages, customs, and traditions of the people and with a view to the promotion of their comfort and the preservation of the public peace and good order. It comes as no surprise that the progressives embraced eugenics.

Progressives believed that Darwinian science, the idea of ever-advancing progress written into biology itself, had proven the inherent superiority and inferiority of the races. It was only a small step for Wilson to resegregate the federal workforce. It was only another step for the government to launch sterilization programs on those deemed by the experts of the day to be unfit to reproduce, upheld by my court in Buck v.

Bell in an opinion written by no less a figure than Justice Oliver Wendell Holmes. We can argue over whether you believe in immutable, absolute natural rights or the Wilsonian idea of ever-progressing history. Indeed, your school of civic leadership was created to host just such arguments, but let me ask you to consider the consequences.

European thinkers have long criticized America for remaining trapped in a Lockean world with its weak, decentralized government and strong individual rights. They say our 18th century declaration has prevented us from progressing to higher forms of government, but we were fortunate not to trade our Lockean bonds for the supposedly enlightened world of Hegel, Marx, and their followers. Fascism, which after all was National Socialism, triggered wars in Europe and Asia that killed tens of millions.

The socialism of the Soviet Union and the People’s Republic of China proceeded to kill more tens of millions of their own people. This is what happens when natural rights give way to the higher good of notions of history, progress, or as Thomas Sowell has written, the visions of the anointed. None of this, of course, was an improvement on the principles of the declaration.

Tocqueville’s Democracy in America is largely about how America owed its superiority over Europe to its conscious decision to reject central planning and administrative rule, root and branch. Progressivism, in other words, is retrogressive. As Calvin Coolidge said on the 150th anniversary of the Declaration, and I quote, if all men are created equal, that is final.

If they are endowed with inalienable rights, that is final. If governments derive their just powers from the consent of the government, that is final. No advance, no progress can be made beyond these propositions.

If anyone wishes to deny their truth or their soundness, the only direction in which they can proceed historically is not forward but backward toward the time when there was no equality, no rights of individuals, no rule of the people. When Abraham Lincoln addressed the assembled crowd at Gettysburg, they had gathered to memorialize the past, but Lincoln’s address urged them to not do so with complacency. Instead, Lincoln said, they should look to the past as inspiration to take them to greater heights in the future, and I quote, it is rather for us to be here dedicated to the great task remaining before us, that from these honored dead we take increased devotion to that cause for which they gave the last full measure of devotion, that we were highly resolved that these dead shall not have died in vain, that this nation shall have a new birth of freedom, and that this government of the people, by the people, and for the people shall not perish from the earth.

As we are gathered to celebrate the 250th anniversary of the Declaration, it may be tempting to do so as if we are passive spectators. It may be tempting to enjoy our tea and crumpets, treat the Declaration like a shiny object or a keepsake, and listen to the sound of our own voices. We could get into debates over whose conception of the founding is better, over how we are so much better than our founders were, over what we would do differently.

We could be careful to not do anything that exposes us to criticism, costs us friends, or hurts our career prospects. But in my view, we must find in ourselves that same level of courage that the signers of the Declaration had, so that we can do for our future what they did for theirs. Each of you will have opportunities to be courageous every day, whether your calling in life is as a day laborer, a stay-at-home mom, a small business owner, an educator, an office worker, a judge, or some other endeavor.

It may mean speaking up in class tomorrow when someone around you expects you to live by lies. It may mean confronting today’s fashionable bigotries, such as anti-Semitism. It may mean standing up for your religion when it is mocked and disparaged by a professor.

It may mean not budging on your principles when it will entail losing friends or being ostracized. It may mean running for your school board when you see that they are teaching your children to hate your values and our country. It may mean turning down a job offer that requires you to make moral or ethical compromises.

One thing I do know to be true. It will mean waking up every day with the resolve to withstand unfair criticism and attacks. These are the choices that we will confront, that will confront you, and you must decide whether to respond with timidity or with courage, as the signers of the Declaration did.

It will, of course, not be easy. It never is. But if, like me, you need a greater source of strength than yourselves, you will need to rely on your faith to guide and to sustain you through it all.

You will disappoint people you thought were friends and endure personal attacks, as well as attacks on those you care about. But if you stand, you will find that courage, like cowardice, can be habit-forming, and it will become a part of your life and a part of who you are. And I may dare say it is liberating.

You will also be a living example for others to emulate. So by all means, celebrate the Declaration of Independence. It is the most important act of American history, the foundation of our Constitution, and, as Lincoln said, the sheet anchor of our republic.

But I implore you to celebrate it by standing up for it, by defending it, and by recommitting yourselves to living up to its ideals. Channel the courage of the men who faced down a king and signed it. Or a president who led the nation in a civil war, rather than permit this house to be divided by the great contradiction of slavery.

Take increased devotion to that cause for which they gave the last full measure. And, with a firm reliance on the protection of divine providence, let us mutually pledge to each other our lives, our fortunes, and our sacred honor. Thank you, and may God continue to bless our country.

Please Support Independent Journalism

Just about every “expert” analysis has been wrong.

Consequently, when even alternative media outlets such as ZeroHedge puts out yet another “doomsday” headline about the Persian Gulf, we are well advised to regard what follows with more than the usual skepticism.

The chemical in question is sulfuric acid, a major byproduct of oil refining, particularly refining of heavy “sour” crudes with high sulfur content.

Goldman analysts Kyle Shaffer and Amanda Ross provided clients with a broad overview of industrials and natural resources amid energy disruptions in the Gulf area. In the note, they stated that the well-known Gulf energy shock is set to disrupt LNG production in Qatar for years to come. However, they also highlighted another emerging supply crunch that has received far less attention: sulfuric acid.

“Some long-lasting consequences have also started to emerge, including a 3-5 years production loss for LNG facility in Qatar, a 6-12 month re-starting time for some aluminum facilities in the Gulf, and shortage of sulfuric acid which can potentially impact future production for copper and lithium” Shaffer and Ross said.

Even a cursory glance at commodities prices shows that anything coming out of the Persian Gulf has seen major price appreciation since the start of Operation Epic Fury. To the extent that industrial chemicals are shipped from Persian Gulf refineries, it is a given that, at present, those chemicals are not being shipped from Persian Gulf refineries.

How significant is the loss of Persian Gulf sulfuric acid? Depending on the analyst, it is anywhere from very significant to presenting a national security threat.

Any supply dislocation of a key industrial chemical is obviously a costly event…but for whom? When not every cost is shared equally around the world, who pays the most and who pays the least can be more significant than the cost itself.

Update

With Iran just this morning declaring the Strait of Hormuz fully open, an additional question which will have to play out is how quickly will the supply dislocations ease and pre-war normal shipping flows be restored to the Persian Gulf?

Please Support Independent Journalism

Beware The Narrative

The constant caveat in reading all reporting about the war in Iran, and really any war, is to beware the narrative. Media outlets all veer towards propaganda and deliberate bias—a sad reality of modern journalism that is also why All Facts Matter exists.

As one reader has remarked:

It’s pretty much impossible to follow the various narratives. I read so many Substacks that are referential to some media environment. Most people I know don’t watch MSM (cable news) and some read Liberal elite papers, some read Conservative elite papers. But even within the ideologies there is more divergence. And you can’t even get into it when the Substackers start treating their Substack algorithmic silo as understood by the audience. I read stuff referencing people I’ve never heard of like its assumed that everyone has read that piece.

Getting harder every day to organize around narrative construction like that.

With bias a near constant fixture in what passes today for journalism, we owe it to ourselves to both be aware of any outlet’s narrative lens and to remain focused on the facts without regard to the narrative lens.

For every media outlet, it is imperative to look past the headlines. Even narrowly focused outlets are prone to provocative and even misleading headlines. An article in “Mexico Business” which covers much of the same territory on sulfuric acid as ZeroHedge, appeared the other day under this headline:

Reading into the article itself, we find the lede well and truly buried almost at the end:

While Mexico is not among the most affected countries, tighter global supply and rising prices could increase input costs for domestic industries, particularly mining and fertilizers, reinforcing the country’s sensitivity to external supply shocks in critical industrial chemicals.

China’s sulfur export ban does raise economic risks for Mexico, but only a little.

These sort of media manipulations are why I often advise readers to “trust nothing. Verify everything.”

That being said, what is the story on sulfuric acid? What is the impact of the war with Iran on sulfur and where is it being felt?

Please Support Independent Journalism

Persian Gulf Blockade Is Hitting China Hard

What tripped media concerns over sulfuric acid was China’s recent announcement, first reported on April 10, that it is suspending exports of sulfuric acid, owing to shortages within its own industries.

Particularly relevant is China’s apparent justification for the export ban: it needs to conserve the chemical for its own supply chains and manufacturing industries.

China’s move to conserve sulfuric acid supplies during the peak crop-planting season will put further pressure on the market. That squeeze will hit the copper-mining industries in key producers such as Chile, the Democratic Republic of Congo and Zambia.

Acuity first reported the Chinese ban on Thursday, saying the restriction could last throughout 2026. China’s Ministry of Commerce didn’t immediately respond to a request for comment.

The need to conserve contradicts other reporting we have seen about China, some of which has assessed China as having the resource depth to fend off oil supply disruptions for months.

Yet, its supply buffer of an estimated 1.2-1.3 billion barrels of crude in strategic and commercial stockpiles could last up to four months, Rush Doshi, director of the China Strategy Initiative at the Council on Foreign Relations, told CNBC on Monday, when oil prices briefly hit $118 per barrel.

“China has taken the last 20 years to reduce some of its dependence on maritime oil flows,” Doshi said.

If China has ample reserves of crude, why is it feeling the need to restrict exports of a byproduct of heavy crude refining?

Corporate media does not say.

Yet the data shows that China is paying dearly for sulfur right now, as the war with Iran has pushed what China pays for sulfur up more than 65% just since the start of the war.

The impact to China of the current surge already exceeds the price spike when Russia invaded Ukraine in 2022.

Why is China suspending sulfur exports? With their cost for sulfur running nearly double from just before the start of the war with Iran, China is hoarding the chemical. China does not want to see the price its manufacturers pay for sulfur going any higher.

China may have four months’ supply of crude in reserve. That does not mean it has four months of sulfur as well. Based on current pricing as well as China’s export ban, we must conclude that China does not have much of a sulfur reserve.

Perversely, the ban may not solve China’s problems, and may even make them worse. While sulfur is particularly useful for smelting industrial metals such as copper, exporting sulfur has been a means for Chinese smelters to defray other costs and keep their operations profitable. The export ban may actually hamper China’s copper production.

For China’s copper smelters, the policy shift could accelerate production cuts. Smelters had relied on strong sulfuric acid prices over the past year to offset a sharp decline in treatment charges caused by a shortage of copper concentrate. However, increased domestic availability of acid following the export halt may cap or reverse price gains, weakening that support.

“Acid prices may slow down their rising pace or even flip into a fall, but neither is good for us,” said an official with a Chinese smelter.

Spot treatment charges for imported copper concentrate in China fell to a historic low of minus US$77/t on April 10, compared with minus US$76.7 a week earlier and minus US$28.6 a year ago, according to Argus data. The negative margins reflect intense competition for limited concentrate supply, leaving smelters increasingly dependent on byproduct revenues

With or without a sulfur export ban, closing the Strait of Hormuz is producing significant and broad price shocks throughout China’s industrial sectors.

Please Support Independent Journalism

Not Just China

Digging even further into the industrial chemical market, it is readily apparent that several parts of the world rely on Persian Gulf refinery output for large portions of their sulfur supply.

According to BusinessAnalytiq, however, the price impacts of losing Persian Gulf sulfur production vary widely.

China and Asia are feeling the worst price shocks, with India not far behind.

The US, on the other hand, is feeling much less impact, and is unlikely to feel much more of a pinch for the foreseeable future.

Contrast that with Chile, which buys over a million tons of sulfuric acid from China every year, the price has risen 44% in just the past month. The chemical plays a vital role in copper production, and Chile is the world’s number 1 producer of copper.

Disruption of sulfur production in the Persian Gulf or from Persian Gulf oil stocks will likely impact a variety of industries worldwide. Sulfur, and particularly sulfuric acid, has a number of industrial applications.

Primary Industrial Applications:

• Fertiliser Production: 65% of total consumption for phosphate rock dissolution

• Metal Processing: 20% for copper leaching operations and other metallurgical processes

• Chemical Manufacturing: 10% for intermediate compound synthesis

• Specialised Applications: 5% including battery production and petroleum refining

As Africa sources much of its sulfur consumption from the Middle East, the surge in sulfur prices is hitting countries with large resource extraction economies—Zambia and the Democratic Republic Of Congo in particular—extremely hard.

The longer the Strait of Hormuz is closed, and the longer Persian Gulf oil production is offline, the more challenging the sulfur supply situation gets for these countries.

Please Support Independent Journalism

Not The US

The disparity in sulfur prices shown above brings us back again to the caveat about narratives. Recognizing the bias within media narratives is crucial to making sense of media reporting on any issue.

While ZeroHedge is focusing on overall global industrial impacts, America’s military thinkers at West Point see potential military and national security concerns arising from the supply dislocation.

While the United States produces significant sulfur domestically, the near-total disruption of shipping through the Strait of Hormuz, which accounts for approximately 50 percent of global seaborne sulfur trade flows, has compounded an already tight market. US sulfur prices have increased 165 percent year-over-year to over $650 per metric ton; and now the price has surged by 25 percent just since the Iran war began. This makes domestic procurement fiercely competitive, while also threatening the import of specific ultra-high-purity grades required for advanced manufacturing. It is squeezing one of the most consequential inputs to modern industrial power.

The West Point narrative bias is clear, and it emphasizes immediate logistical and pre-logistical impacts without regional differentiation. While logistics is hugely important to successful warfighting, what matters most is having better logistics than potential adversaries.

As with all commodities, all markets have some exposure when there is a supply rupture. That is certainly the case with sulfur. Just this month US sulfur prices have surged 34%.

Yet a price surge is not the same as a supply dislocation. One point the West Point narrative brushes past is that the US is itself a major producer of sulfur—it is the number 2 sulfur producer in the world, after China.

Even more significantly, virtually all the sulfur the US does import comes from right next door, in Canada.

As the Strait of Hormuz does not lie between the US and Canada, it is safe to say that the war with Iran is not disrupting physical supply chains for sulfur.

We should also note the quantities of sulfur the US imports: 999,718,000 kilograms is just under 1.1 million tons. The US produces domestically ~8-8.6 million tons of sulfur, which means the US imports between 12% and 13% of its annual sulfur demand.

The price of sulfur in the US is up because the price of sulfur is up worldwide, but the US still has physical access to nearly all the sulfur it uses. The same is not true for Africa, nor is it true for Asia (including China).

Hence the extreme price differentials between sulfur prices in the US and sulfur prices in China. China is grappling not just with a price shock but a supply shock. The US is experiencing only the price shock.

The difference becomes clear when we consider last month’s Producer Price Index data. Virtually all the inflation surge the United States experienced within producer prices in March was due to energy-related products, and fuels especially.

Outside of energy-related products, there was not a lot of inflation in March, and even some disinflation.

Thus far at least, the inflation impact of the war with Iran is still narrowly confined for the US. That could change, and if the war lasts long enough it almost certainly will change, but as of this writing it has not yet changed.

That lack of broad inflation so far in the US economy highlights the particular advantage the US has with respect to Iran and the Middle East: the US is considerably less reliant on the Middle East than is Europe or Asia. Even a cursory glance at price surges for oil and gas both here and in Europe illustrates that, for natural gas especially, the price differentials are quite significant.

Dutch TTF natural gas is still up nearly 40%, and that’s after talks and rumors of talks have calmed markets down. US natural gas has actually declined in price.

Even West Texas Intermediate crude is up less than its European counterpart, Brent Crude.

Diesel prices show the same disparate impact from the war with Iran:

Energy inflation is bad in the US, but it’s worse in Europe.

The same is proving true for industrial chemicals such as sulfur/sulfuric acid. There is a cost burden from the war that is being felt by the US, but it is being felt far more in China, in India, and in Europe.

Please Support Independent Journalism

A World Problem

The economic reality of the war’s impact is still very much what I pointed out a few days ago:

Whether Starmer or any other world leader agrees with Donald Trump on the war itself, Iran’s closure of the Strait of Hormuz is far more a UK issue, a France issue, an India issue, than it is a US issue. Even if one concedes that Operation Epic Fury is not “Europe’s war”, the closure of the Strait is indisputably Europe’s problem.

The economic fallout from the Strait’s closure was never going to be limited to just oil or diesel, even if those are the commodities that get noticed first. Yet, as we are seeing with sulfur and sulfuric acid, the dislocations brought on by the closure of the Strait of Hormuz are felt to a far greater degree nearly everywhere but the United States. In nearly every regard, the US is experiencing far smaller economic impacts than the rest of the world.

Does this make ZeroHedge’s take on sulfur production inaccurate? Arguably, it does.

Yes, global sulfur production is disrupted. Yes, sulfur prices are up significantly even in the US. These aspects of the war and its consequences are undeniable.

Yet what ZeroHedge overlooks, what the military thinkers at West Point gloss over, is that the cost from that rupture is falling on different parts of the world to different degrees. What ZeroHedge overlooks, and what the military thinkers at West Point gloss over, is that the US has the curious good fortune to be bearing the smallest portion of the overall costs from Operation Epic Fury, the war with Iran, and the current blockade of the Strait of Hormuz.

In a race to the bottom of global sulfur supply ruptures, the winning position is to come in last. At present that position belongs to the United States.

Closing the Strait of Hormuz is imposing a number of supply shocks and dislocations on the global economy. There is a cost to each of those supply shocks and dislocations.

So far, the burden of those costs is falling on just about everyone’s shoulder’s except the United States’.

Please Support Independent Journalism

The Producer Price Index for final demand increased 0.5 percent in March, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices moved up 0.5 percent in February and 0.6 percent in January. (See table A.) On an unadjusted basis, the index for final demand rose 4.0 percent for the 12 months ended in March, the largest 12-month advance since increasing 4.7 percent in February 2023.

A jump to 4% in factory gate inflation is a sizable surge in any context. At the same time, the context for March’s sizable surge includes Wall Street projections of 4.6% year on year factory gate inflation in March and a Trading Economics forecast of 4.4%.

When an inflation print comes in nearly half a percentage point below forecast, that is unquestionably good news.

Nor is the cooler inflation print the only remarkable item in the summary. Core factory gate inflation actually declined in March, and prices on key items such as fertilizers were impacted by the energy shock far less than might have been anticipated.

We still have inflation, and the PPI summary is still indicating further inflation rises in the CPI data especially.

We do not have signs of hyperinflation—at least, not yet. As the war with Iran is still ongoing, and we still do not know what the endgame for that conflict looks like, we do not know how much more of an energy price shock has yet to be delivered.

The PPI report was a backhanded sort of good news. Energy prices surged. Other prices…not so much.

Please Support Independent Journalism

Core Producer Price Disinflation

Without a doubt the factor that made the March Producer Price Index Summary a better-than-anticipated report was the decline in core factory gate inflation year on year, even as the headline PPI surged up.

The cooler core inflation print means that, just as with the Consumer Price Index report, inflation has not spread beyond energy into the broader basket of goods and services.

Even month on month saw a decline in core inflation.

Headline producer price inflation barely increased at all month on month, even though it surged year on year.

That core producer price inflation cooled significantly even as headline inflation rose is yet another confirmation that, thus far, the inflation brought on by a war-related energy shock is largely confined to energy, and has not percolated through the wider data set of producer prices.

No matter the surge in headline inflation, a report with declining core factory gate inflation has at least that much good news in it.

Please Support Independent Journalism

Even Energy Was Cooler

That energy prices surged at the factory gate in March is not at all surprising. Month on month factory gate inflation for energy prices soared over 8%.

After over a year of continued disinflation and deflation, energy price inflation came roaring back in March.

The reasons for the energy price surge are self-evident: Operation Epic Fury and Iran’s closure of the Strait of Hormuz, which has pushed energy and fuel prices up globally.

Surprisingly, despite the significant overall surge, some fuel prices did not rise as fast, and some even declined. Unprocessed fuels dropped by more than 40% month on month in March. In a month defined by energy price inflation, that is a remarkable shift.

Processed energy goods, on the other hand, “only” rose a more modest 11%—still high, but not egregiously so, given the headline data.

There are number of potential reasons why we are seeing anomalous price shifts within energy. In particular, the need for different types of crude oil to economically produce individual fuel types could very well amount to a price dynamic among some fuels that is far less dependent on the availability of Persian Gulf feedstocks.

Regardless of the reason, the end result is still that, even for energy prices, the March PPI report was better than it could have been.

Food prices, the other component of headline inflation outside of the core metric, actually fell in March.

The spike in food price inflation in February proved to be an outlier, with deflation once again showing itself the dominant trend in factory gate inflation for food.

For March, the energy price shock remained confined to energy prices. While that will likely not remain the case for long, for the moment we are not facing a broad inflation surge that spans multiple subindices.

Please Support Independent Journalism

Not All Fuel Prices Are Equal

The surprising drop in unprocessed fuel prices highlights an important feature of energy and fuel prices: not all fuel prices are the same.

While both retail diesel and retail gasoline prices surged in March, diesel experienced the more dramatic price increase.

Even on futures markets, we see diesel prices increasing by a greater percentage than either gasoline or crude oil itself.

This is particularly relevant when looking at marine fuels. While Marine Gas Oil (MGO), a refined product very similar to diesel, rose significantly in March, the heavier Intermediate Fuel Oil and Very Low Sulfur Fuel Oil both rose considerably less.

Diesel and marine fuels are the essential components of all transportation and logistics. Goods cannot be shipped anywhere if there is not fuel for both ships and trucks.

While MGO is a cleaner alternative to even VLSFO, the far more moderate price increases in IFO and VLSFO will undoubtedly make those two refined products more attractive as bunker fuels for at least the short term.

One reason the apocalyptic predictions surrounding the price rises in diesel have not yet come to pass is that diesel is simply not the whole story on fuels needed to move cargo around the world.

Fuel prices are up not just around the world but across the board. Higher fuel prices are going to challenge freight operators, as they struggle to move goods, pay for fuel, and keep showing a profit. However, while fuel has become significantly more costly, we have so far not seen the levels of fuel scarcity we would need to see to produce the apocalyptic knock-on effects some have predicted would emerge.

If the war with Iran drags on, and especially if the closure of the Strait of Hormuz drags on, there is a possibility we could reach those levels of fuel scarcity. We are not there yet, and we should not reflexively assume that we will get there. A sudden outbreak of peace and we do not get there, now or ever.

Please Support Independent Journalism

Goods Prices Surged, Service Prices Sagged

Goods were the other subindex besides energy that saw a significant inflation surge, with goods prices climbing 1.6% in March.

In contrast, service prices barely rose at all in March.

Even within the goods subindex, energy goods were a significant contributor to overall inflation.

By comparison, the contribution of goods besides food and energy was quite a bit less.

Even within goods, by far the dominant factor driving factory gate inflation in March was energy. But for the surge in energy prices, there was not much factory gate inflation in March at all.

Please Support Independent Journalism

Good News For Fertilizer

Another product that warrants scrutiny within the Producer Price Index is fertilizer.

Several fertilizers, particularly ones to enrich phosphorus and nitrogen in the soil, are derived from fossil fuels. Given the surge in crude oil prices, we might expect to see dramatic increases in fertilizer prices as well.

Except we haven’t seen that—at least, not yet. For both nitrogenous and phosphatic fertilizers, producer price inflation was fairly muted in March.

If we look at the year on year inflation prints for both, we see even less indication of a surge easily connected to the war with Iran.

Factory gate price increases year on year for nitrogenous fertilizers have been rising since the start of the year, coming out of a prolonged deflation phase where much of the price surges of the 2022 hyperinflation cycle were unwound.

Phosphatic fertilizers have seen barely any price increase year on year.

This is particularly good news for farmers everywhere. Fertilizers are an essential link in the food supply chain. Without fertilizers crop yields will decline, harvests will be more sparse, and food price inflation will rise. Food price inflation today can become food insecurity tomorrow, especially among the poorer nations in the world.

As with prices for other goods, we may yet see a surge in fertilizer pricing if the war with Iran drags on long enough. If we do see a surge in fertilizer pricing we could see issues with falling harvests and rising food price inflation—and today’s food price inflation can become tomorrow’s food insecurity.

However, as with everything when it comes to either producer prices or consumer prices, the key word in every assessment is “if”. If certain trends prevail then certain outcomes will happen—but if other trends prevail then other outcomes will happen.

Please Support Independent Journalism

A Look Ahead?

The Producer Price Index has long been seen as a predictor of coming levels of inflation as reported by the Consumer Price Index. One way of looking at the two indices is that the PPI looks at prices when goods are at the loading dock, while the CPI looks at prices when goods are at the cash register with the consumer making the purchase. While that is an oversimplification in many ways, the analogy does illustrate how the PPI can (and occasionally does) anticipate the CPI.

We already have an energy price shock within consumer price inflation. The surge in crude prices has been sufficiently dramatic that it wasted no time in making its presence known within consumer prices.

The March PPI shows the same energy price surge we saw in the March CPI. If the PPI is a predictor of the CPI, then we are looking at the possibility of a further surge in energy prices within the CPI for April, and possibly even for May. We are not (yet) looking at a surge in prices beyond energy goods within the CPI for April or May.

Certainly if the war with Iran continues, and especially if the Strait of Hormuz remains closed, we will see additional price surges primarily in energy. At some point, however, the rise in fuel costs is going to put pressure on other prices, and what starts out as energy price inflation almost exclusively could become far more broadly based. If that should happen, it may be the beginning of a new hyperinflation cycle.

Alternatively, sustained high fuel prices could also suppress consumption, potentially even driving down some prices. In that scenario not only would broader goods prices largely stay the same or decrease, we could also see further declines in employment as well. As I have mentioned before, that scenario could lead us into a stagflationary crisis similar to what this country went through in the 1970s.

There are no crystal balls to tell us which scenario will unfold. If the war with Iran comes off the rails we could easily see a fairly catastrophic inflation scenario emerge. If the war with Iran ends tomorrow we will, in all probability, see a drop in crude oil prices and a rise in Persian Gulf crude oil production.

The economic impacts of the closure of the Strait of Hormuz, along with the wider war prosecuted by Iran before the ceasefire, are likely to persist for some time after the war ends, even if by some miracle the war ends tomorrow. Even if the war ends we will not see an immediate return to pre-war price levels.

For now, those economic impacts are confined primarily to energy. If the price surge lasts long enough, we will see higher fuel costs push up prices in other categories as well, as producers confront the increased cost challenges of bringing their goods to market. However, we do not have that now, and if the war ends quickly we may not have it ever.

If.

Please Support Independent Journalism

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.9 percent on a seasonally adjusted basis in March, after rising 0.3 percent in February, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.3 percent before seasonal adjustment.

We knew this report was coming. We knew the energy shock was coming.

It was obvious there would be an energy shock when the February CPI print came out.

The energy price inflation spike in March was an economic shock. The news that there was an energy price inflation spike in March was not at all shocking.

Yet there are questions lurking within the data, questions that may end up shaping our understanding of what happens with consumer price inflation in April and throughout the summer months.

Energy prices were up, and so headline inflation was up. Core inflation, however, was far more muted. For some categories inflation is even cooling.

Cooling inflation can be a sign that demand is decreasing. If demand is decreasing then economic growth is slowing.

Slow economic growth coupled with an energy price shock is how we got the stagflation crisis of the 1970s.

It is far too soon to conclude that we are seeing stagflation in the US economy. It is not too soon to wonder if what is unfolding is a fresh hyperinflation cycle or a stagflationary crisis.

Please Support Independent Journalism

Headline Inflation Rose On Energy Shock

The year on year inflation print shows a dramatic shift for headline inflation in March.

However, the rise in core inflation seems almost a routine fluctuation. Month on month, that core inflation actually cooled gets lost against the backdrop of headline inflation’s energy-driven surge of nearly 0.87%

The reason for the disparity, of course, was energy prices, all of which soared in March as a consequence of Operation Epic Fury, President Trump’s war with Iran. That war has resulted in energy prices rising 10.88%.

As we would expect from a surge of that magnitude, it was an across-the-board increase: Crude oil, diesel, and reformulated gasoline all soared in March.

Natural gas actually declined—a stark demonstration of the significant of energy independence.

That market prices for both crude and refined products are driving consumer price inflation for March is largely confirmed by the fact that, within energy price inflation, the primary drivers were the costs for diesel and gasoline.

Please Support Independent Journalism

Outside Of Energy, Inflation Cooled In March

While energy prices were soaring, other parts of the March CPI data were showing disinflation and even outright deflation.

Food prices actually dropped in March.

Inflation cooled for services.

Goods, however, saw inflation heating up significantly. Nondurable goods saw month on month inflation of nearly 2.6%.

Even durable goods, which have been printing deflation in recent months, returned to month on month inflation.

Intriguingly, shelter price inflation also rose, with the more conservative BLS subindex printing 0.3% month on month and the more forward-looking ZORI index printing close to 0.4% month on month.

However, outside of energy, the inflation surge was mostly limited to nondurable goods—which is why month on month core inflation actually fell.

It is this seeming dichotomy between core inflation and energy price inflation (and thus headline inflation) which compels us to question if this is the beginning of a stagflationary crisis, with an energy price surge colliding with a cooling economy, or if this is a simple price shock.

Please Support Independent Journalism

Is The Economy Heating Up Or Cooling Down?

Assessing the risks from the price shock which hit the US economy in March begins with determining whether or not economic activity is increasing or decreasing—whether the economy is heating up or cooling down.

As I have discussed previously, what separates ordinary inflation from stagflation is the level of economic expansion that is (or is not) occurring.

Conceptually, stagflation is when rising prices collide with low economic growth or even economic contraction1.

Stagflation combines stagnant economic growth, high unemployment, and persistent inflation.

Obviously we have rising prices in March. Do we have low economic growth?

We demonstrably have year on year growth in real GDP that has been trending down since the end of 2023.

We demonstrably have year on year growth in Real Personal Consumption Expenditures that has been trending down since the start of 2025, although there are signs that trend may be reversing in 2026.

We demonstrably have year on year real investment growth that is charitably described as “volatile” but which has declined overall since 2021 and 2022.

We demonstrably have year on year real growth in imports and exports that is also broadly trending down.

We demonstrably have what many will receive as good news, year on year real growth in government spending that has trended down since the end of 2024 and turned negative at the end of 2025.

Every major contributing sector to overall Gross Domestic Product has a growth trend that is down. This confluence of trends arguably points to an economy that is softening and slowing down.

That is certainly confirmed by the BEA’s report that real GDP growth fell off a cliff at the end of 2025.

President Trump’s claims of a “Golden Age” in the US economy notwithstanding, there is more than a little evidence to sustain the assessment that the economy is cooling down and not heating up.

Please Support Independent Journalism

The Job Recession May Not Be Over

While the March Employment Situation Summary report showed far better job growth than anticipated, it is far from clear that this country’s jobs recession has ended.

The Employment Level from the Current Population Survey (Household Survey) portion of the jobs report shows that employment peaked in this country at the start of 2025 and has trend down since.

The Employment-Population Ratio, also from the Current Population Survey, has been declining since 2023.

While unemployment has declined since last fall, in both real and “official” terms, the longer term trend in joblessness is still one of increase rather than decrease.

While the data does not (yet) point to an economy that is unequivocally suffering, the data does show that a considerably amount of job growth is needed for American workers to participate in President Trump’s “Golden Age”.

Rising joblessness trends and falling employment levels certainly call into question the premise that the US economy is growing. As a rule, we look for growing economies to have increased demands for labor. If the economy is growing we should expect to see unemployment trending down and the employment level trending up. At present we see the polar opposite of that.

Even with the positive headline numbers on the March jobs report, it would be a considerable stretch given the current data set to argue that the jobs recession if over. We are not there yet.

Please Support Independent Journalism

Is This Stagflation?

The degree of stagflation risk posed by the March inflation surge hinges entirely on whether the economy is robust and growing, or sclerotic and declining.

Certainly for the first three quarters of 2025, economic growth overall was strong for an economy as large as America’s.

The fourth quarter GDP print, however, breaks with that narrative completely.

While we cannot infer a trend from a single quarter, there are several trends across the whole of the economy which suggest the fourth quarter GDP numbers may be a confluence of negative factors and not an economic outlier after three strong quarters of GDP growth.

Consumption growth has been softening.

Investment growth has been volatile but broadly declining.

Imports and exports have been declining.

The realities of the ongoing jobs recession also argue against presuming the US economy is hale and healthy. With the Employment Level and Employment-Population Ratio both declining, while joblessness is increasing, the labor portion of the economy is far from in good health.

The sudden rise in fuel costs could potentially further hinder consumption, as every dollar consumers put into their vehicle’s fuel tank is a dollar that cannot be spent elsewhere. That same rise could also produce shipping and transportation dislocations, as trucking concerns must grapple with a price surge that likely exceeded all of their budget forecasts and resource planning.

If that proves to be the case, we will see a drop in consumption over the next couple of months simply because there will be less available to consume, while the resulting scarcity shock will push prices for many goods higher even as overall demand is pushed lower.

That is the stagflation scenario.

However, if US oil producers are able to produce more, and oil refinery logistics can recalibrate for the sudden shifts in global energy markets, even before the Persian Gulf flows are restored the US could see fuel prices and supply trend back towards pre-war levels. Increased oil production could produce job and wage benefits which would help end the jobs recession and bring more Americans to the level of prosperity intimated by Trumpian rhetoric of a “Golden Age.”

That is the inflation scenario.

It will be a few months still before we see which scenario is the one unfolding before us. Jobs, consumption, and inflation numbers all have to trend across a few months to know what the trend is.

What we know for now is that March energy price inflation printed considerably than it has been, while core inflation is still cooling. With only limited improvement in market prices for oil and its refined products, there is little reason to anticipate at present that April will bring any improvement. April could quite easily see even worse inflation. People may be hard pressed to distinguish between the present inflation surge and that from the start of the 2022 hyperinflation cycle.

What happens beyond April rests entirely on the outcome of the next phase(s) of the war with Iran. Will the Strait of Hormuz be reopened? Will Arab oil production be quickly restored? Will the Persian Gulf be consumed in a paroxysm of violence which decimates Middle East oil flows for the next few years?

All of those scenarios lie with the realm of current probability. One of them will happen—but we do not know which one.

Will we have inflation or stagflation? So long as the fog of war lingers over Operation Epic Fury, we are not going to know.

Please Support Independent Journalism

“We have been at it now for 21 hours, and we’ve had a number of substantive discussions with the Iranians. That’s the good news,” Vance said. “The bad news is that we have not reached an agreement, and I think that’s bad news for Iran much more than it’s bad news for the United States of America.”

With regards to the war and to the broader impasse between Iran and the United States, not a lot has changed over the past few days. My assessment of the state of affairs in the Persian Gulf is broadly the same as it was four days ago:

All scenarios are still on the table. The ceasefire could collapse today, tomorrow, or next week. The Khamenei regime could collapse today, tomorrow, or next week.

There is, however, one notable shift, and we shall have to see how it plays out: President Trump is threatening to impose his own blockade on the Strait of Hormuz.

Is this a collapse of the ceasefire? Not yet, if only because as of this writing there are no new reports of air strikes, missiles, or drone attacks from either side. I will not be surprised if that changes even within the next few hours.

Will this change the strategic calculus in the Persian Gulf? It could. How the blockade unfolds will determine its ultimate impact. For now President Trump’s message to Iran is clear and unequivocal: If the United States’ demands are not met, Iranian oil will not flow.

Please Support Independent Journalism

21 Hours Of Talking Without Resolution

As diplomatic negotiations go, the Islamabad talks were put together with blinding speed—and collapsed with equally blinding speed.

We must remember the ceasefire was declared less than a week ago, when Donald Trump and Iranian Foreign Minister Abbas Araghchi jointly accepted a Pakistani ceasefire proposal, and agreed to the talks.

Yet even before the talks began, Iran put out some extraordinary claims on what agreements had already been made (or not made)—including an assertion that the US agreed to release some $6billion in frozen Iranian assets.

That claim was quickly denied by the US, and there have been no independent reports of any frozen Iranian funds being released to the Khamenei regime.

The denial of such claims did not stop the head of the Iranian delegation, Parliamentary Speaker Mohammad Bagher Ghalibaf, from doubling down on them during the runup to the actual talks themselves.

While we cannot say if Ghalibaf genuinely believed those claims to be true or was merely attempting to gain leverage in the negotiations, we can say that the effort produced no leverage against the US negotiating team of Vice President JD Vance, Special Envoy Steve Witkoff, and Jared Kushner, President Trump’s son-in-law. In remarks made prior to leaving Islamabad, JD Vance made it clear that Iran did not agree to meet US “red line” conditions for peace.

As I have noted previously, the US “red line” conditions are easily and succinctly stated:

• Iran will not enrich uranium

• Iran will not pursue nuclear weapons

• Iran will not develop long range ballistic missiles

• Iran will not maintain its network of terror militias across the Middle East

• Iran will not close the Strait of Hormuz

• Iran will not threaten Arab states in the Persian Gulf

While we do not know what was actually said during the negotiations themselves, there is little reason to presume the US position on any of that has been altered.

With that as a backdrop, we perhaps should not be surprised that President Trump chose to respond to the failure of the talks by blockading the Strait of Hormuz.

Regardless of how much control Iran has or does not have over the Strait of Hormuz itself, there is little doubt which navy can control the egress to the Strait into the Gulf of Oman. The United States Navy will now be interdicting shipping traffic out of the Strait of Hormuz, thereby cutting off even Iran’s oil exports.

Please Support Independent Journalism

Did Trump Anticipate This?

While it is purely speculation on my part, I do wonder if the Trump Administration had not been preparing all along for the talks to fail.

While the talks were ongoing, the Trump Administration announced the US Navy was beginning minesweeping operations in the Strait to clear out the Iranian mines.

CENTCOM said USS Frank E. Peterson and USS Michael Murphy transited the strait and operated in the Persian Gulf in a broader mission aimed at removing mines previously laid by Iran’s Islamic Revolutionary Guards Corps.

“Today, we began the process of establishing a new passage and we will share this safe pathway with the maritime industry soon to encourage the free flow of commerce,” said CENTCOM commander Gen. Brad Cooper.

President Trump, in typical Trumpian fashion, was even more braggadocious, not only calling out Iranian failures in reopening the Strait but also the failures of other leading nations to step up and help defend internationally recognized rights of transit passage through the Strait.

All this he posted to social media as the Islamabad talks were getting underway—whatever else one wishes to conclude about Donald Trump’s social media postings, one thing seems clear: Donald Trump was not worried about the Iranians agreeing to reopen the Strait because the US Navy was already starting to reopen the Strait.

One reason the US was doing this was advanced by the New York Times, and has not been refuted by the Khamenei regime: Iran does not know how to locate or remove its own mines from the Strait.

Iran used small boats to mine the strait last month, soon after the United States and Israel began their war against the country. The mines, plus the threat of Iranian drone and missile attacks, slowed the number of oil tankers and other vessels passing through the strait to a trickle, driving up energy prices and providing Iran with its best leverage in the war.

Iran left a path through the strait open, allowing ships that pay a toll to pass through.

Iran’s Islamic Revolutionary Guards Corps has issued warnings that ships could collide with sea mines, and semiofficial news organizations have published charts showing safe routes.

Those routes are limited in large part because Iran mined the strait haphazardly, U.S. officials said. It is not clear that Iran recorded where it put every mine. And even when the location was recorded, some mines were placed in a way that allowed them to drift or move, according to the officials.

If that report is true, then Iran’s claim of control over the Strait is ultimately illusory.

If that report is true, then Iran cannot guarantee safe passage through the Strait to any ship, regardless of whether or not it pays a toll. If Iran does not even know where the mines are, it does not know what the safe sea lanes are.

The New York Times reporting relies on unnamed US officials, and provides no solid provenance for those assessments, but Iran has not said or done anything to rebut the reporting. While we do not know the New York Times is correct on this, neither can we assume the New York Times is wrong.

If the New York Times reporting is at all factual, then the failure of the talks could suit President Trump just fine. If the US Navy succeeds in clearing the mines and reopening the Strait while maintaining a blockade in the Gulf of Oman, Iran’s strategic leverage collapses.

Please Support Independent Journalism

Oil Prices—Iran’s Real Target?

While the geopolitical calculus over the Strait of Hormuz remains very much an exercise in speculation, what is not a speculation is the impact these events have had on energy prices.

Even with the encouragements of the Islamabad talks getting underway, spot prices for diesel contracts are as of Friday trading still 44% above pre-war levels.

Not only are energy prices up, but significant differentials have emerged between European benchmark energy contracts and American ones, especially for natural gas.

Nor is that the only energy price differential to emerge. Since the war began, Arab “heavy” (or “sour”) crude—the crude type from which diesel is extracted—has gained a significant price premium both over benchmark oil prices for Brent crude and West Texas Intermediate.

Iran’s heavy crude has not had the same price appreciation.

While it is too soon to assess exactly how this shift in pricing—the Arab premium did not exist prior to the war with Iran—will impact global energy economics, if this becomes the “new normal” for oil prices, there will be significant impact.

Even without this shift in oil pricing becoming more or less permanent, the present reality remains that the Strait of Hormuz is not open to commercial traffic, with some two thousand vessels trapped within the Persian Gulf.

Even though Iran nominally has declared the Strait of Hormuz open, most of the Strait’s 20 million barrels per day of oil flow is currently blocked, and the few oil pipelines in the Persian Gulf region cannot even begin to compensate for the disruption in flows of seaborne crude.

At present, more than 90% of normal traffic through the Strait is idled on side or the other, waiting for the US and Iran to sort out their differences.

With Persian Gulf oil as well as natural gas still bottled up in the Persian Gulf, unable to safely transit the Strait, a substantial portion of global energy flows have been taken at least temporarily offline.

This reality has not gone unnoticed by the Arab states. As the Islamabad talks were heading toward their unsatisfactory conclusion, the UAE oil minister Dr. Sultan Al Jaber posted on X defending the Strait as an international waterway and condemning any attempt by Iran to close or regulate it.

Was this part of Iran’s strategy all along? Have they closed the Strait and attacked Arab oil and natural gas production infrastructure precisely to alter the pricing dynamics of the Persian Gulf?

To answer that question now would be pure speculation. However, during the Islamabad talks, an account on X purportedly belonging to Iran’s new Supreme Leader Mojtaba Khamenei posted a sovereign claim by Iran to the Strait.

Whether that social media posting represents the official stance of the Khamenei regime is uncertain. Still, the posting is in line with earlier regime commentary on the status of the Strait and Iran’s claimed “rights” over it.

Has Iran used the war as an opportunity to improve its own export position in the Persian Gulf by disrupting oil production by the Arab states in the region? We cannot dismiss that possibility.

Please Support Independent Journalism

What Comes Next? Mostly Questions

As has been true throughout this war, we cannot say with certainty what will unfold next.

Will oil prices surge again when trading resumes after the weekend? At least for the immediate term, that is a likely result.

Will the Strait of Hormuz reopen? Eventually it must, but there is no way to ascertain any definitive timeline as to when.

Presumably the US Navy will continue minesweeping the Strait to remove Iran’s rogue mines. Presumably the US Navy will also interdict traffic coming out of the Persian Gulf in much the same way it interdicted shipping to and from Venezuela previously. That would mean that oil flows will resume not when Iran says they will but when the US says they will.

Until the Strait reopens, global energy flows and petrochemical logistics will remain disrupted. While not necessarily the energy apocalypse some are predicting, the longer the disruption prevails the greater the impact it will have on the global economy.

Here in the United States, retail fuel prices have surged, and diesel especially is flirting with highs last seen during the 2022 hyperinflation cycle.

With the failure of the Islamabad talks, we can safely presume that retail diesel prices will continue to move higher at least for the next few days and possibly weeks.

Already the impacts are reverberating into the wider US economy, with the March inflation numbers surging. With no prognosis for a reversion to pre-war energy price levels, within the US inflation will almost certainly rise again in April, driven primarily again by energy prices.

The impact of the diesel price surge on the world’s economies is likewise certain to severely negative. Diesel is the primary fuel for trucking operations worldwide. The cost for that fuel has increased worldwide by roughly 50% in the span of just a few weeks. Transporting goods overland is quite a bit more expensive today than it was just a month ago, and there is every reason to presume it will be more expensive a month from now than it is today.

That is a logistics shock which, while unlikely to completely halt global commerce, is quite likely to create new logjams not unlike the post-COVID supply chain ruptures experienced in 2021 and 2022, and which further contributed to the 2022 hyperinflation cycle globally.

The immediate economic ramifications of the Strait’s continued closure are fairly straightforward. These are things we know must happen because these are the consequences of Persian Gulf oil not being allowed to flow.

Less certain is what other nations besides the United States will do in response. Virtually all nations have affirmed that the Strait of Hormuz is an international waterway, yet the United Nations Security Council has been unable to pass even a resolution to that effect, much less one calling for the Strait to be reopened by force if necessary.

Geopolitically, what we have now are mainly questions.

Are the nations of the world content to sit passively on the sidelines while 20% of global energy flows are effectively cut off? So far, they have been.

Will the US blockade of Iranian traffic out of the Strait of Hormuz bring enough global pressure to bear that other nations will be forced to take stand and do something, either with the United States naval effort or against it? Prior to this war, I would have speculated the answer to be “yes”, but the willingness of even America’s NATO allies to remain uninvolved in protecting energy flows which demonstrably impact their economies far more than they do the US economy makes that presumption extremely problematic.

The larger and still unanswerable question coming out of this war: what is the future of the current maritime trading order which is the foundation of nearly all the world’s economies? Can global commerce proceed smoothly when vital waterways are vulnerable to the whims of various regional powers and conflicts?

Corollary to that is what force protects those vital waterways? Can any force protect them?

As regards the propriety of the war itself, and of Operation Epic Fury, Iran’s responses and obvious duplicity just prior to the Islamabad talks leaves another awkward question hanging: what is the alternative?

Please Support Independent Journalism

From the preceding month, the PCE price index for February increased 0.4 percent. Excluding food and energy, the PCE price index also increased 0.4 percent.

From the same month one year ago, the PCE price index for February increased 2.8 percent. Excluding food and energy, the PCE price index increased 3.0 percent from one year ago.

Year on year, the numbers aligned with Wall Street as well as Trading Economics almost perfectly.

Even core inflation fell right in line with Wall Street’s projections.

While the numbers may have been in line with Wall Street’s expectations, the Cleveland Fed’s InflationNow nowcast was more noticeably off the mark, under-assessing inflation by 0.1pp year on year for the headline and core numbers.

Still, February’s inflation data on the surface presented no surprises whatsoever. On the surface, February’s inflation data was, like January, “more of the same.”

We should enjoy that. Next month will be a completely different situation. Whatever else we can see in the February PCE data, one thing is already clear: most if not all of the trends within will be ended by the war with Iran and the energy price shock it has delivered to the world.

Yet when we peel back the layers, we see that inflation was already ramping up even before the start of the war with Iran. Energy prices were up, and durable goods prices especially were up. Consumption was up. Disposable personal incomes were down.

Even before the first bombs fell in Operation Epic Fury, February’s inflation data were precursor and prelude to the inflation shocks coming in March and April.

Please Support Independent Journalism

Headline Numbers Were Predictable…And Predicted

When the data meets expectations, finding a meaningful comment becomes a bit of a challenge. We talk about surprises. Normalcy invites little in the way of discussion.

On the surface, the PCE inflation data did meet expectations. Headline inflation remained the same, with the core data year on year printing a slight decline.

Month on month, the top level data looked even better. Headline inflation was up, but core inflation cooled.

On the surface at least, things are not looking bad with respect to consumer price inflation, although if this were the whole story we would again have to wonder if the US economy was slipping into stagnation.

As is always the case with economic data, however, this is not the whole story.

Please Support Independent Journalism

Energy Price Inflation Returns

When we dig deeper into the details we begin to see some pricing shifts in energy and durable goods, but also increased consumption.

The most notable shift was the return of energy price inflation.

This is not surprising, given oil’s steady rise throughout February.

February saw an across the board increase in energy prices, with crude oil, diesel, and reformulated gasoline all rising approximately 10% on the month.

When market energy prices are rising across the board, there is little left to pull prices back down again.

Food price inflation also heated up incrementally in February, rising from .23% to .25% month on month.

The combined impact of both rising energy price inflation and food price inflation for February was to hold the headline inflation metric constant even as the core metric ticked down.

Please Support Independent Journalism

Durable Goods Prices Jumped

Drilling into core inflation for February, the most significant part was the dramatic increase among durable goods prices of more than 1% month on month.

Even nondurable goods prices were up significantly, an increase magnified by January’s flirtation with deflation.

By comparison, service price inflation cooled significantly, falling by half to 0.21% month on month.

As is always the case, there are a multiple of forces which can combine to push prices up. Perhaps the most noteworthy force for February was the rise in consumption, especially for durable goods.

With a significant rise in durable goods consumption, we should not be surprised that the increased consumption resulted in bidding up durable goods prices. That consumption rose overall further reinforces this possibility.

Rising consumption is broadly a good thing, as rising consumption largely translates into economic expansion and growth.

However, for February the rising consumption was not matched by rising real disposable personal income (RDPI). Against the incremental increase in consumption is a fairly substantial drop in disposable personal income.

The income drop is disconcerting. Not only does it presage the decline in weekly paychecks reported on the March Employment Situation Summary, the decline was the second largest since Donald Trump took office.

This was the continuation of an unpleasant trend, as real disposable personal income has been in decline since at least 2024.

One does not need to hold a PhD in economics to realize that declining disposable incomes will at some point put a constraint on how much consumption can increase. Potentially, this would explain why consumption peaked in late 2024 before trending down even before Donald Trump took office.

One reason stagflation hypotheses have lingered is because of declining metrics such as real consumption expenditures. When circumstances result in zero growth or very little growth for consumption, economic growth is simply not happening.

Please Support Independent Journalism

March Will Break All The Trends

February saw signs that inflation was heating up in parts of the economy. The jump in durable goods especially was an indicator that inflation overall might be heating up even if just somewhat.

While the rise in consumption is, broadly speaking, a good sign, the drop in disposable personal incomes is not. The ongoing decline in disposable personal incomes is a distinctly worrisome trend. Lack of disposable personal income is a constraint on consumption, and it is distinctly possible that constraint has played a role in keeping inflation trending down in this country.

However, we know that March will not be the continuation of any such trend. Thanks to Operation Epic Fury and the war with Iran, we already know that March inflation will be significantly higher, and driven mainly by energy prices.

Wars are disruptive that way. We would anticipate that even without considering the impact of rising crude oil and diesel prices that we have seen throughout March. Even without consumption, even with a constraint on consumption from falling disposable personal income levels, the energy price shock from the war with Iran is going to reshape price levels and inflation across the whole of the economy.

We already know much of this because we have already seen some of the price shifts in real time.

While one month does not a trend make, the inevitable war-driven surge in consumer price inflation will force us to consider whether and to what degree a stagflation scenario might be unfolding in the US economy.

While the stellar jobs numbers for March work against such a scenario for March, labor markets have been toxic and dysfunctional for long enough that any dramatic and sustained surge in prices starts to look an awful lot like the 1970s, when rising unemployment collided with rising consumer prices. Certainly February’s PCE data does little to dispel such concerns.

If the war with Iran continues to drag on, and especially if the recently and still quite fragile ceasefire fails to hold, we might see inflation and unemployment combinations that look distressingly stagflationary. The inflation data from both January and February leave that possibility very much on the table.

The key word in that assessment, of course, is “if”.

If the war with Iran reiterates anything for us it is to not get ahead of the data. We know the March Consumer Price Index data will show surges in headline, energy, and core inflation. We do not know if April will bring major corrections to the March jobs data, nor do we know how long the inflation surge will last. We will not be concerned with stagflation if the inflation metric goes up and then goes right back down in the subsequent month.

Will we get back to something like February’s data once the war with Iran is over? That we do not know, and cannot know.

If oil prices remain elevated for whatever reason, we will not be returning to February-like numbers on inflation and consumption even after the war with Iran is over.

If oil prices drop down to pre-war levels, a return to February-like numbers on inflation and consumption is not at all out of the question.

February was the end of several trends regarding inflation and economic growth. We can see looking back that it was a precursor and prelude to the inflationary price shocks coming on from the war with Iran.

March will bring a jump in consumer price inflation. March may bring significant shifts in both income and consumption. We do not know what April will look like at all.

The fog of war is extending into the economics of wartime.

Please Support Independent Journalism

We know this because, when it came to the war with Iran and Operation Epic Fury, self-anointed “expert” after self-anointed “expert” made their predictions, gave their projections, and what we have as of this writing was not what any of them anticipated.

Early yesterday evening, Donald Trump accepted Pakistan’s proposal for a two-week ceasefire.

A short time later, Iran followed suit.

As of this writing, we have the beginnings of a ceasefire and possibly peace between the United States and Iran.

As of this writing, the Strait of Hormuz is open for international shipping.

As of this writing, Persian Gulf oil flows are able to resume.

Will the ceasefire hold? We do not know.

Will the Arab states quickly restore pre-war production levels? That mightily depends on your definition of “quickly”. They will restore pre-war production levels, the only question is “when?”

We are still facing a dramatic surge in energy prices, and while the supply shock may be ameliorated at this point, we will see the beginning of that surge in the upcoming inflation reports. How much inflation are we going to get? We do not know and cannot say.

The analysts who predicted apocalypse, however, got it wrong.

The analysts who extrapolated a Trump win through the seizure of Kharg Island also got it wrong.

As I pointed out two weeks ago, all scenarios were still viable and still on the table.

Virtually every conceivable scenario for what happens next in this war remains very much on the table. Virtually every conceivable scenario could be what happens next in this war.

Which of those scenarios will we see unfold? Nobody knows.

The ceasefire scenario was the one everyone dismissed the most, and that was the scenario we were given.

All scenarios are still on the table. The ceasefire could collapse today, tomorrow, or next week. The Khamenei regime could collapse today, tomorrow, or next week.

Every prediction turned out to be wrong. Every “expert” making the predictions turned out to be wrong.

What comes next? I do not know, and neither do the “experts”.

Please Support Independent Journalism

Energy Apocalypse Postponed

One of the more dire predictions that has emerged since Iran closed the Strait of Hormuz was that the world economy would crash in literally days.

The world is about to run out of diesel. This isn’t a hypothesis, a prediction, or a guess. It is a physical reality.

It will start with the poorest countries.

Laos will run out of diesel in three days (on April 5). It has zero refining capacity. It relies on imported diesel from Thailand. Already 40% of its diesel stations are closed. Cambodia and Myanmar will be next (on April 7). Then Bangladesh (April 9).

No one will notice, most likely. But on April 10, Pakistan will run out of diesel. Pakistan is a nuclear power with more than 250 million people.

They have eight days of fuel left.

Unless the Strait of Hormuz is fully re-opened, the world faces the largest humanitarian crisis since the Black Death of 1347-1353.

The price of diesel fuel has surged since the start of the war, that much is indisputable. Also indisputable is that, with the announcement of the ceasefire, diesel prices have declined dramatically.

Fuel shortages have also been a reported reality across Southeast Asia. Cities like Manila, in the Philippines, which normally has bustling traffic, is seeing much less traffic on the streets of late.

Those same fuel shortages are also prompting both China and the Philippines to reconsider their behavior in the South China Sea, as both countries would benefit from pursuing oil and gas exploration there.

But in a recent interview with Bloomberg, Philippines President Ferdinand Marcos Jr appeared to flag an interest in renewing joint oil and gas exploration with China in the South China Sea.

Filipino security analyst Chester Cabalza said there was an opportunity to tap into “huge deposits” of oil.

“We know we’ve been struggling with our relations with Beijing because of the 2016 arbitration,” he said.

“Some are saying that we should not close an energy deal with Beijing, because it means we are submitting on our claims in the South China Sea.

“But given the situation and the energy crisis … I think this is a wakeup call for us for how we should treat China.”

Is the world going to run out of diesel? Not yet, and, if the ceasefire holds, not for quite some time.

This does not mean there will not be shortages. The closure of the Strait of Hormuz has been hugely disruptive to oil production in the Persian Gulf. Iraq shut in as much as 70% of its crude oil production in early March after it ran out of oil storage capacity.

Crude oil production from Iraq’s southern fields has dropped by 70% since the start of the U.S. and Israeli war on Iran, with the average daily production at 1.3 million barrels, compared with 4.3 million barrels daily before the war began.

“Crude storage has reached maximum capacity, and the remaining output after the major cut will be used to supply the country’s refineries,” an official from Basra Oil Company told Reuters. The company is the state-owned entity that markets Iraq’s southern oil, which accounts for most of its production.

Around the same time, Saudi Arabia trimmed its oil output by 20%, and for the same reason—storage.

It will take time for the shut-in production to be restored, and that is assuming that the ceasefire holds and there is lasting peace.

Nor is it simply crude oil production that has been disrupted. Everything that comes from oil, from plastics to fertilizers, is disrupted, both because of the oil flows themselves and because the Persian Gulf states are major producers of a number of petrochemical products.

The Middle East accounted for over 40% of polyethylene exports in 2025, led by Saudi Arabia, and ships to nearly every region outside North America, the next largest exporting region.

Prices for plastics such as polyethylene (PE) and polypropylene (PP) have surged since the Middle East conflict began, tracking higher crude and feedstock costs.

“Global logistics have become uncertain, with up to 50% of polyethylene supply either offline, constrained or being impacted following the events in the Middle East,” said Dow CEO Jim Fitterling.

There is already a fuel and price shock unfolding in the global economy. It will continue to unfold for a while yet, and, as I observed yesterday morning, the shock will touch every sector of every economy.

Yet the world still has diesel. Unless (until?) the ceasefire collapses, the world will continue to have diesel. Barring a major turn of events, this worst case scenario will not come to pass.

The “experts” got it wrong.

Please Support Independent Journalism

Kharg Island Not Taken—Yet

Equally misplaced were the predictions that US Marines would land on Kharg Island, seize the oil terminal, and shut down 90% of Iran’s oil exports.

Not only did that not happen, with a ceasefire in place it is not going to happen.

It is true that Kharg Island is where 90% of Iran’s oil exports are loaded.

As the data analytics firm Kpler detailed in a recent update, tiny Kharg Island — roughly eight kilometres long and five kilometres wide — is nevertheless the most critical piece of Iran’s oil economy.

“Iran has spent decades building pipelines from major inland producing areas to the island, turning it into the main collection, storage and loading point for crude before it moves to international buyers,” the update said.

That concentration leaves Iran extremely vulnerable. In the year before the war, 94 per cent of Iran’s crude exports left on tankers from Kharg. Any sustained disruption would immediately threaten most of the country’s export capacity, Kpler warned.

With virtually all of Iran’s oil exports flowing through Kharg Island, there is no doubt that seizing control of the island would cripple Iran’s economy in short order.

President Trump himself has hinted that he might order the seizure of the island, as part of a move to “take” Iran’s oil.

The US president told the FT in an interview on Sunday that his “preference would be to take the oil”, comparing the potential move to Venezuela, where the US intends to control the oil industry “indefinitely” following its capture of strongman leader Nicolás Maduro in January.

Speculation that an assault on Kharg Island was about to happen has been fueled by the deployment of units such as the 31st Marine Expeditionary Unit to the region, along with its floating base of operations, the USS Tripoli.

The U.S. Central Command said in a social media post that the USS Tripoli, which serves as the flagship for the Tripoli Amphibious Ready Group / 31st Marine Expeditionary Unit, arrived in its area of responsibility.

It’s the most updated of the amphibious warships, known as a “big deck,” which allows more room for F-35 Stealth Fighter Jets, Ospreys and other aircraft. The ship had previously been based in Japan when the order to deploy to the Middle East came almost two weeks ago.

While President Trump has consistently downplayed any desire to put “boots on the ground” in Iran, he nevertheless has moved some 50,000 troops into the Middle East—not enough for any sort of invasion of Iran itself, but enough for “small” operations such as the seizure of Kharg Island.

Commentators in corporate media outlets such as The Atlantic have played up the risks of an assault on Kharg Island, noting that the island is close to Iran and relatively far from US bases which could resupply any force sent to take the island.

But even without such tactics, the Iranians could make holding Kharg very difficult. The operation would likely take longer than 15 days, which is about how long an expeditionary unit can operate without logistical support. Kharg is far—140 miles—from American assets in Kuwait City, but very close to Iran’s coast. Resupply vessels would be exposed not only to cruise-missile fire but also to Iran’s “mosquito fleet,” which includes robotic drones, sometimes called unmanned surface vessels (Ukraine used similar devices to bottle up the Russian Black Sea fleet at Novorossiysk).

Kharg Island is a vital link in Iran’s oil economy. Kharg Island is vulnerable to an assault by shock troops such as the 31st Marine Expeditionary Unit. Kharg Island is difficult for a US force to hold.

Kharg Island is also still in Iranian control, and, assuming the ceasefire holds, likely to remain in Iranian control.

Predictions that Kharg Island was the next step in President Trump’s grand strategy were wrong. Predictions that US troops would get bogged down holding the island were wrong. Predictions that President Trump would turn off Iran’s economy like flipping a switch by taking Kharg Island were wrong.

Was taking Kharg Island necessary to force open the Strait of Hormuz? Not so long as Iran keeps to its side of the ceasefire bargain.

Please Support Independent Journalism

What Comes Next?

Every analyst with projections and predictions aims to answer one simple question: “what comes next?” No matter what is being analyzed, no matter who is doing the analyzing, attempting to answer that question.

Looking ahead to see what might come next is fundamentally what I do with All Facts Matter.

The challenge is always recognizing where what is known ends and what is speculated begins.

We know that, as of late last night, futures pricing for Dutch TTF Gas—a main benchmark for natural gas pricing in Europe—is up some 70% since the start of Operation Epic Fury.

We know also that, as a result of the ceasefire announcement, crude oil prices have fallen from approximately 55% above pre-war levels to “only” 34%. We know that US natural gas prices have actually fallen over the course of the war—a demonstration of what US energy independence actually looks like.

We know that diesel futures pricing in the US and Europe followed crude oil prices down last night.

With diesel fuel contracts sill 40% above pre-war levels, the world is still looking at a significant price shock. A 40% jump in roughly six weeks is quite a price surge even for energy prices, which are routinely more volatile than prices for other goods (which is why inflation data separates energy prices from “core” prices).

We know that European inflation has already risen significantly during March, with the war with Iran a likely primary driver.

We know that energy inflation in Europe is the main contributor to that overall surge in consumer price inflation.

We can plausibly extrapolate that Europe will experience some economic turmoil as a result of this surge in consumer price inflation.

US inflation data for March is due out at the end of this week. We are almost sure to see similar effects within the US data. We can extrapolate that just from the fact that the Energy Information Administration has charted US retail gasoline prices up some 47% from the start of the year, and US retail diesel prices up some 62%.

We do not need to speculate if there is going to be a price shock hitting the US economy—we already have evidence that an oil price shock is hitting the US economy even now.

We can plausibly extrapolate that there will be a measure of economic turmoil in the United States from the swift rise in fuel prices. When fuel prices go up, everything gets more expensive, simply because it then costs more to move goods from supplier to consumer.

What we do not know is whether or not fuel prices are going to move higher.

What we do not know is whether or not oil prices are going to rebound and possibly climb even higher than before.

We do not know—and we cannot know—because we do not know—and cannot know—whether or not Iran will continue to keep the Strait of Hormuz open. We do not know—and cannot know—what the outcome of ceasefire and peace talks are going to be. We do not know—and cannot know—if the Iranian people are going to at last rise up and topple the Khamenei regime.

We did not know as late as yesterday afternoon if President Trump would give the go-ahead order for a massive bombing campaign against Iranian infrastructure. We did not know if there would be retaliatory Iranian strikes against the Arab states in the Persian Gulf.

Nobody knew what President Trump would ultimately do until he did it. Nobody knew what the Khamenei regime would ultimately do until they did it.

Nobody knows what either President Trump or the Khamenei regime will do next.

Over the past 72 hours the world has moved from Apocalypse Maybe to Apocalypse Soon and flirted with Apocalypse Now. As of this writing, the world appears to be at Apocalypse Later.

With respect to the war with Iran, that’s what we know.

With respect to the war with Iran, that’s all we can know.

Tomorrow may bring a peace breakthrough or it may bring a ceasefire breakdown. Both outcomes are plausible, and either outcome can be legitimately assessed as being probable.

Tomorrow may bring further reduction in oil, natural gas, and diesel prices, or it may bring a renewed surge in all three. Both outcomes are plausible, and either outcome can be legitimately assessed as being probable.

The ceasefire agreement gives us hope that we will have at least two weeks without war, but hope is all that it really gives us.

There will be “experts” who will assess with confidence what the ceasefire means, and how it will play out for the Persian Gulf and for the world.

What I assess is that all of those “experts” have already proven they have not a clue what they are talking about.

Please Support Independent Journalism

With results that practically invite memetic comparisons on the theme of “hold my beer”, the Bureau of Labor Statistics blew past the ADP numbers as well as Wall Street projections.

Total nonfarm payroll employment increased by 178,000 in March, and the unemployment rate changed little at 4.3 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in health care, in construction, and in transportation and warehousing. Federal government employment continued to decline.

Wall Street had expected numbers in line with the ADP report. Trading Economics was somewhat more pessimistic.

Instead, the BLS nearly tripled the ADP numbers.

As long-time readers are well aware, I am generally suspicious of numbers which sound too good to be true. Certainly the BLS has given us plenty of reasons to question the integrity of its methods.

Are the numbers too good to be true? Almost certainly. Not only must we consider the inevitable “revisions” that will happen next month and the following month, but we must also contend with diverging data within the March jobs report itself.

At the same time, there are reasons to conclude that there was robust job growth in March, at least as strong as reported by ADP. Even more encouraging, there are signs both the economy and the US labor market may be moving onto an accelerated growth trajectory. There is a distinct probability that President Trump’s economic policies are starting to bear serious fruit.

The March Employment Situation Summary may prove too good to be true, yet it may still prove to be still good.

To add to the confusion, the ongoing war with Iran upends all prognostication and projection. Everything now hinges on the duration of Operation Epic Fury and how long Persian Gulf oil flows will be disrupted. Regardless of whether we consider the March jobs report good or not good enough, it may not matter in the face of the gathering storm of oil price and supply shocks about to break over the global economy.

Please Support Independent Journalism

Lou Costello Labor Math?

If the March jobs report is too good to be true, how can we establish that within the data itself? What clues are there that the job growth numbers are skewed higher than they should be.

There is an easy test to establish if there is a credibility problem with the BLS jobs numbers: compare the results of the Establishment Survey and the Household Survey from within the Employment Situation Summary report alongside the ADP National Employment Report. As all three survey sets nominally are sampling from the same jobs market, we should expect to see broadly similar trends across all three.

For the past few months, the Household Survey data has diverged dramatically from the Establishment Survey data.

While the Employment Level trend vs the All Employees trend was problematic at best for 2025, over the past three months the Employment Level has broken completely with the Establishment Survey, posting declines as the jobs numbers are going up.

We should not expect the labor surveys to match precisely, but a 0.7pp decrease in the Household Survey’s Employment Level and a 0.2pp increase in the All Employees, Total Private data across the same time frame should not happen. Yet it has over the past three months.

To this we must include consideration of the revisions that have already happened for 2026. Between revised numbers for January and February, the BLS’ job creation statistics already are guilty of overstating job growth by some 11,000 jobs just in the first two months.

Note especially the 41,000 reduction from February’s already horrendous job numbers, moderated in large part by a final and very optimistic revision to January. The total variance thus far is “only” 11,000 in the negative.

Regular downward revisions after the fact have been a recurring theme for the BLS jobs report in recent years, and 2026 is so far proving no exception.

To the question marks raised just within the Employment Situation Summary itself, we must also consider recent PMI data from the Institute for Supply Management, which indicates that March was yet another contraction month for Manufacturing Employment—an outcome the BLS report flatly contradicts.

Lending some credence to the March jobs numbers is the ISM Services Employment PMI metric, which has shown job growth since December.

When looking at PMI data, any number above 50 indicates expansion (or job growth, in this case), and any number below 50 indicates contraction (or job loss).

We do well to take the March jobs report with a very large grain of salt. Not only is there a significant probability of continued downward revisions eliminating a significant portion of the reported 178,000 created jobs, there are contrarian signals both within the jobs report itself and in some of the external data.

The March report sounds too good to be true—and there are good reasons to believe that it is too good to be true.

Please Support Independent Journalism

Trump Administration Cheerleading, Media Caveats

As has become common anytime the BLS puts out a robust jobs report, the Trump Administration wasted no time in crowing about it and how it shows how well Trump policies are serving the US economy.

The March jobs report blew out expectations with strong construction job growth and a surge in manufacturing job creation as trillions of dollars in investments begin to materialize. America remains on a solid economic trajectory thanks to President Trump’s proven agenda of tax cuts, deregulation, tariffs, and energy dominance.

Alternate media outlets ZeroHedge and Breitbart were largely optimistic in their recitation of the jobs numbers. The Epoch Times was a bit more sober in its assessment, noting the wide spectrum of jobs data that was reported last week.

The flurry of data released this week painted a mixed picture of the employment situation, complicating the labor market outlook.

Demand for labor softened in February, with job openings falling to 6.882 million, from an upwardly revised 7.24 million in the previous month.

Quits—the number of people voluntarily leaving their positions—declined to 2.974 million, from a slightly upwardly adjusted 3.131 million.

These figures indicate “a cooling labor market amid tariff headwinds and lingering inflation uncertainty,” says Gina Bolvin, president of Bolvin Wealth Management Group.

Corporate media was also quick to caveat the numbers, with CNN noting that future reports are sure to be colored by impacts from Operation Epic Fury, and the economic fallout from that war.

If the job numbers hold up over time—and that is still a very big “if”—then the March report will stand as a strong indicator that the jobs recession may be at last coming to an end.

If the job numbers hold up over time, the Trump Administration’s victory lap will be well deserved.

If.

Please Support Independent Journalism

Sectors Were Mostly Good

One encouraging sign in the jobs data is that most job sectors showed some growth in March.

Manufacturing posted strong job growth for the first time in over a year.

Construction also turned in strong job growth numbers, and Mining (which includes oil and natural gas production) posted a welcome reversal from the declines which marked 2025.

Among service sectors, Healthcare once again was the jobs creation leader, returning to strong job growth after a negative February (a contraction attributed largely to recent healthcare worker strikes). Leisure was another sector with strong job growth, with Trade, Transportation, and Utilities rebounding from February to post modest job gains. Professional Services, although continuing to fade from a January surge, also eked out marginally positive numbers.

Only two sectors printed job losses for March: Finance, which showed either weak growth or job loss through the latter half of 2025, and Information, which is continuing to shed jobs as it did throughout 2025.

The March jobs report showed the sort of balanced job growth that has been lacking in recent jobs reports. While Healthcare’s continued dominance in job creation is cause for concern over the longer term, with most sectors reporting at least some job growth, there is no denying that the US economy needs to see many more job reports at the sector level like March. Nothing lifts all ships like a rising tide which manages to reach all ships.

Please Support Independent Journalism

Weak Spots Persist

While the jobs numbers from the Establishment Survey are undeniably good, the jobs report contains several areas which remain cause for concern.

The unemployment rate did tick down, both at the official level and at the higher “real” level (which includes those not in the labor force but who want a job now).

While there is indication that both rates are trending down since last fall, they are still significantly above their January 2025 levels, and the longer term trend extending back to April 2023 is still one of increasing joblessness. Incremental improvement is improvement, but not enough to declare the trend of rising joblessness at an end.

We have to be skeptical on joblessness, for while the number of officially unemployed individuals declined in March, those not in the labor force but who want a job now increased.

As the variance between the official and real unemployment rates indicates, there is a large portion of individuals nominally interested in working who are not being counted as part of the official unemployed—their number rose in March, and that’s never a good sign.

Also not a good sign is the number of workers who actually left the labor force in March, which also rose, and for the fourth month in a row.

We cannot ignore these individuals, because when people exit the labor force they are exiting jobs in many cases, but are not being counted as part of the unemployed. As the number of individuals who left the labor force in March—488,000—exceeded the drop in unemployed individuals of 332,000, can we reliably say that jobless actually declined in March?

No. We cannot.

That joblessness is still on the rise is also indicated by the recent downward trend in the Employment Level.

That likelihood is further confirmed by the continued decline of the Employment-Population Ratio.

One of the reasons we can peg the start of the jobs recession to mid-2023 is that the Employment-Population Ratio began to trend down at that time. That trend has continued under President Trump, and so far in 2026 has even accelerated.

This is a trend we do well to monitor closely, because a primary reason the US economy is reputed to have done well during the 1980s and 1990s is that these were the decades when the ratio reached a zenith.

Since then the ratio has been been reduced by recession, most especially during the 2008-2009 recession following the Great Financial Crisis and the 2020 COVID Pandemic Panic. The decline since 2023 is the first time since the ratio began to be recorded after WW2 that it has declined when there was not an “official” declared recession.

When the proportion of working to non-working individuals in the population declines, there is no economic scenario in which that represents economic strength or health.

That alone is a warning sign that tells us the headline jobs numbers in the March report are far from the entire story on employment in the United States.

Please Support Independent Journalism

What About Wages?

Beyond the red flags within the jobs data itself, wage growth also presents several areas of concern in the March jobs report.

While goods-producing weekly earnings rose and have recovered from the 2022 hyperinflation cycle, private sector service-providing weekly earnings as well as weekly earnings overall declined relative to inflation.

We should add a very large caveat here that the March jobs numbers come out in advance of the March inflation numbers. Goods-producing wages’ success in overcoming the 2022 hyperinflation cycle may prove to be undone by what could prove to be the start of another hyperinflation cycle.

Across the first three months of 2026, wage growth has softened across all sectors, with healthcare weekly earnings declining for the second month in a row.

Robust job growth is what creates upward pressures for wages and earnings. If wages are not responding to that upward pressure, we do well to question how robust the job growth truly is.

Wages are one area where job markets have not been at all equal. Manufacturing wages in particular have recently grown at rates exceeding the rate of inflation, and have been able to overcome the growth in the CPI from the 2022 hyperinflation cycle.

Healthcare wages, however, have not done nearly as well, and still lag consumer price growth by a substantial margin.

Even without the March inflation data, it is clear that in March the situation for healthcare workers relative to inflation got worse and not better.

While the Trump Administration crows about wages having risen 3.9% over the past year, the economic reality is that such an increase, is not nearly enough to recoup from hyperinflation. Until workers are made whole from that economic dislocation, the degree to which they share in Trump’s “Golden Age” remains eternally suspect, if not outright nonexistent.

Please Support Independent Journalism

Too Good To Be True, But Still Good?

With the red flags, warning signals, and weak spots within the March jobs report, it is almost certain that the headline jobs figure touted across nearly all media outlets as well as by the Trump Administration is too good to be true.

Could the reality of employment in the US for March still be largely good? Yes, it could.

While much will hinge on the magnitude of future revisions, it would take a record level of revision for all the job growth reported in March to be erased. It would take record revisions just to bring the reported job growth down to what ADP reported for the month. The red flags and warning signs tell us there are likely to be downward revisions, but to extrapolate from that a record downward revision would be pure speculation.

Without record downward revisions, we are left with job growth numbers that are still pretty good. If, as some economists suggest, the breakeven job creation rate is around 40,000 jobs per month, without a record downward revision the March job report will show solid job growth. Solid job growth, especially when balanced across most sectors of the economy, is exactly what is needed.

Yet questions must remain, particularly because of the declining employment level and declining employment-population ratio. Regardless of the reasons people are not employed, a healthy economy is when the number people employed in the economy is increasing. Regardless of the reasons people are not employed, a healthy economy is when the number of people working is increasing relative to the number of people who are not. Neither case is what we have presently, and that indicates the economy is not as healthy as many want to believe.

The March jobs report paradoxically is likely to be both too good to be true and still good, although it is impossible to tell at present whether it is good enough.

What Comes Next?

By far the biggest question, however, is the one no one can possibly answer at the moment: what comes next? We cannot say, because the key driver for the foreseeable future is the war with Iran, and the ongoing oil shock from Iran’s closure of the Strait of Hormuz.

Aside from concluding that the next evolutions of that war will be hugely economically impactful, the fog of war precludes easy extrapolations.

What history tells us is that the duration of an oil shock figures heavily in its ultimate economic impact. If the war ends quickly, and with complete reopening of the Strait of Hormuz, the economic impacts will be minimized. If Iran lashes out and does substantial damage to Persian Gulf energy production, and especially if Iran’s Kharg Island oil terminal is damaged or destroyed, the oil shock could carry on for some time, amplifying its economic impacts.

What the red flags and warning signs within the March jobs report tell us is that the United States may not be in the strongest possible economic position to deal with an extended oil shock and resulting price dislocations. As much as the prevailing wisdom from “experts” at the Federal Reserve dismiss the potential of a 1970s-style stagflation crisis, the growing magnitude of oil price and oil supply dislocations means that potential is increasing.

Even Wall Street and corporate media economists are concerned about stagflation potentials as this war drags on.

The question marks all revolve around oil and the refined products we get from oil, all of which are found throughout the global economy. Oil prices are up, as are those for gasoline, diesel, and all the other refined products derived from oil.

Will these costs retard labor growth, as business strive to avoid passing cost increases on to their customers? They could.

Will these costs spike consumer price inflation, with the ultimate effect of suppressing consumer demand? There will be an inflation surge of some magnitude (the March inflation data will be our first look at how great a magnitude). How much demand destruction ensues from that price surge remains a question.

So long as the war continues, so long as the Strait of Hormuz is closed, so long as Persian Gulf oil flows are disrupted, the global economy is heading into some very rough economic times. Stagflation may ensue globally, and recession is a global possibility.

No matter how one views the March Employment Situation Summary, looking ahead reduces almost entirely to the eventual outcome of Operation Epic Fury, how long before the Strait of Hormuz is reopened, and how long before normal pre-war Persian Gulf oil flows can be resumed. Whatever those outcomes prove to be are going to be far more influential on future jobs reports than any of the data presented in the March report.

What comes next for US job markets? Until the war with Iran ends, we do not know.

Please Support Independent Journalism

ADP repeated that result again for March, with a jobs print that at the headline number was virtually identical to February.

Private sector employment increased by 62,000 jobs in March and pay was up 4.5 percent year-over-year according to the March ADP National Employment Report® produced by ADP Research in collaboration with the Stanford Digital Economy Lab (“Stanford Lab”).

February, readers will recall, ADP put job growth at 63,000.

That figure has since been revised upward, to 66,000.

Dr. Nela Richardson, ADP’s Chief Economist, offered her usual upbeat assessment of the ADP jobs data.

Overall hiring is steady, but job growth continues to favor certain industries, including health care. In March, this solid performance was accompanied by a boost in pay gains for job-changers.

There is no denying that ADP is reporting two months of solid job growth. 66,000 jobs in February and 62,000 jobs in March is indisputably solid job growth.

Whether 60,000+ new jobs each month is enough job growth to meet the needs of the US economy is a much more problematic assertion. The ADP jobs numbers may be good overall, but there is also good evidence to support the contention that 60,000+ jobs is not quite good enough.

Please Support Independent Journalism

Above Breakeven?

Presumably, 60,000+ jobs created per month is above the country’s current “break even” creation rate—the rate at which job creation matches population growth to keep the unemployment rate stable.

As recently as 2024, the breakeven unemployment rate was considered to be six figures. But now, the number may be far lower. Researchers at two think tanks, the Brookings Institution and the American Enterprise Institute, estimated in a paper last month that it could be as low as 10,000 to 40,000.

Whether ADP’s jobs print is above the breakeven rate is debatable, however. The BLS data indisputably shows that joblessness has been on the rise in this country.

Even in the official unemployment data, joblessness is on the rise. If we consider as well those not in the labor force but who want a job now, not only is that “real” unemployment rate higher than the official rate, it has been rising incrementally faster as well.

If the unemployment rate is rising, we are not creating jobs above the breakeven rate. To be above the breakeven rate we would need to see sustained decreases in the unemployment rate. That is not what is happening.

62,000 jobs is solid job growth, but we almost certainly need more job growth than that each month if we do not want to see the unemployment rate rise any further.

Rising joblessness means the ADP National Employment Report is showing solid not not quite sufficient job growth. We are still shy of where we need job growth to be if we want to see an ending to the jobs recession.

Please Support Independent Journalism

Two Sectors Did All The Work

Also of concern is that, once again, job growth was focused on only one or two economic sectors, to the detriment of the others.

Even within ADP’s solid jobs report, we still have manufacturing shedding jobs.

Even within ADP’s solid jobs report, we still have Transportation, Trade, and Utilities.

Much as has been the case for quite some time yet, March was yet another month where job growth was concentrated in just one or two sectors.

Healthcare has been a primary driver of job creation for quite some time, printing strong job growth at least as long as manufacturing has been printing job losses.

While the remaining economic sectors (Construction, Finance, Information, Leisure, and Professional Services) all showed some job growth, only Construction showed more than marginal, incremental growth.

Without Healthcare, and to a lesser extent Construction, the ADP report would show negative job growth at the headline level.

One small bright spot which deserves mentioning is the jump in Natural Resources and Mining jobs.

Is the uptick in mining employment part of the network effects from the war with Iran and resultant surge in oil prices? That is a plausible interpretation of the data in context, and while higher energy prices are distinctly undesirable, should they prove a jobs catalyst that would mitigate their negative economic impacts somewhat.

Mining jobs aside, however, what the ADP report is not showing is balanced job growth. It is not showing economically healthy job growth. The ADP report is certainly not showing the sort of job growth we need if President Trump is to realize his Agenda 47 goal of making the US a “manufacturing superpower”.

As good as the numbers might be, those are problems which we should not ignore.

Please Support Independent Journalism

Wall Street Was Surprised—And Pleased

While the ADP report may or may not be above the breakeven rate for job creation, it was above what Wall Street anticipated for the month.

That Wall Street was pleasantly surprised is self-evident just from watching the Dow Jones Industrial Average, which had a good day for a change.

The euphoria was not complete, however, as Treasury yields continued their rise.

In forex markets, the dollar index had a down day, suggesting that international investors are somewhat less than enthused by the US economy at present.

In most regards, such uneven market results are a perfect reflection of the uneven and unclear messaging conveyed by the March ADP jobs data itself.

Please Support Independent Journalism

Good But Not Great Results

If the breakeven rate for job creation in this country is around 40,000 jobs each month, then the ADP National Employment Report has for the second month in a row turned in a solid jobs report.

If.

That joblessness and real unemployment rates have been rising for not just months but years at this point is a rebuttal to the premise of a lower breakeven rate. By definition, job growth above a breakeven rate produces a decline in unemployment, not an increase.

Moreover, that healthcare has been the primary engine of job creation in this country is problematic all on its own. Goods producing jobs—i.e., manufacturing and mining—tend to have higher wages. For that reason alone, there is an intrinsic economic preference for goods producing jobs.

While the March report itself was more or less evenly balanced between service jobs and goods producing jobs, it was the first such balanced month in over a year.

Healthy job markets in a healthy economy will produce robust job growth across all sectors and over time. The ADP report does not show the US producing balanced job growth. Job growth in the US has been particularly skewed towards service jobs, and towards healthcare jobs in particular.

Given that service jobs are overall lower-paying jobs than goods producing jobs, the tilt towards service jobs means the economy is cultivating less labor value. In a pure economic sense, the higher wage which tend to accompany goods producing jobs make such jobs more valuable.

As job growth is generally a predicate for wage growth, a tilt towards goods producing jobs would produce greater wage growth sooner. With wages still playing catch-up to the 2022 hyperinflation cycle, an emphasis on goods producing jobs would accelerate the restoration of long-term equilibrium between wages and prices.

The ADP National Employment Report does chart a headline jobs figure that is solid and is arguably above what many believe to be the breakeven rate for employment. That’s the good news.

The ADP National Employment Report does not chart balanced job growth. The report also does not show any indication that Manufacturing’s chronic job loss especially is about to end. That’s the bad news.

As a result, while the jobs recession in this country has not gotten any worse, neither has it gotten any better. For that we need considerably more good news and considerably less bad news than the March ADP report contains.

Please Support Independent Journalism

Please Support Independent Journalism

Transcript:

Thank you very much.

My fellow Americans, good evening.

Let me begin by congratulating the team at NASA and our brave astronauts on the successful launch of Artemis II. It was quite something. It will be traveling further than any manned rocket has ever flown and will very substantially pass the Moon, go around it, and come back home from a distance that has Never been done before.

It’s amazing. They are on the way, and God bless them. These are brave people. We want to God bless those four unbelievable astronauts.

As we speak this evening, it’s been just one month since the United States military began Operation Epic Fury, targeting the world’s number one state sponsor of terror, Iran. In these past four weeks, our armed forces have delivered swift, decisive, overwhelming victories on the battlefield. Victories like few people have ever seen before.

Tonight, Iran’s Navy is gone. Their air force is in ruins. Their leaders, most of them terrorist regime they led, are now dead. Command and control of the Islamic Revolutionary Guard Corps is being decimated as we speak. Their ability to launch missiles and drones is dramatically curtailed, and their weapons, factories, and rocket launchers are being blown to pieces—very few of them left.

Never in the history of warfare has an enemy suffered such clear and devastating large-scale losses. In a matter of weeks, our enemies are Losing in America, as it has been for five years under my presidency, is winning, and now winning bigger than ever before. Before discussing this current situation, I also want to thank our troops for the masterful job they did in taking the country of Venezuela in a matter of minutes. That it was quick, lethal, violent, and respected by everyone all over the world.

After rebuilding our military during my first term, we have, by far, the strongest military anywhere in the world. And now we’re working along with Venezuela and our, in a true sense, joint venture partners. We’re getting along incredibly well in the production and sale of massive amounts of oil and gas, the second-largest reserves on Earth after the United States of America.

We’re now totally independent of the Middle East, and yet we are there to help. We don’t have to be there. We don’t need their oil. We don’t need anything they have, but we’re there to help our allies.

Tonight, I want to provide an update on the tremendous progress our warriors have made in Iran and discuss why Operation Epic Fury is necessary for the safety of America and the security of the free world.

From the very first day I announced my campaign for President in 2015, I have vowed that I would never allow Iran to have a nuclear weapon. This fanatical regime has been chanting, death to America, death to Israel, for 47 years. Their proxies were behind the murder of 241 Americans in the Marine barracks bombing in Beirut, the slaughter of hundreds of our service members with roadside bombs. They were involved in the attack on the USS Cole, and they carried out the countless other heinous acts, including the blood — just horrible, bloody atrocities of October 7th in Israel — something that most people have never seen anything like it.

This murderous regime also recently killed 45,000 of their own people who were protesting in Iran — 45,000 dead. For these terrorists to have nuclear weapons would be an intolerable threat. The most violent and thuggish regime on Earth would be free to carry out their campaigns of terror, coercion, conquest, and mass murder from behind a nuclear shield.

I will never let that happen, and neither should any of our past Presidents. This situation has been going on for 47 years and should have been handled long before I arrived in office.

I did many things during my two terms in office to stop the quest for nuclear weapons by Iran first. And perhaps most importantly, I killed General Qasem Soleimani in my first term. He was an evil genius, a brilliant person. A horrible human being, however, the father of the roadside bomb.

And he lived just horrible what he did. Iran would have been perhaps in far better, stronger position. He lived. We would have had probably a different conversation tonight. But you know what? We’d still be winning and winning big.

And then, very importantly, I terminated Barack Hussein Obama’s Iran nuclear deal, a disaster. Obama gave them $1.7 billion in cash. Green, green cash. Took it out of banks from Virginia, D.C., and Maryland. All the cash they had. Flew it by airplanes in an attempt to buy their respect and loyalty, but it didn’t work. They laughed at our President and went on with their mission to have a nuclear bomb.

His Iran deal would have led to a colossal arsenal of massive nuclear weapons for Iran, and they would have had them years ago, and they would have used them. It would have been a different world. There would have been no Middle East and no Israel right now, in my opinion, the opinion of a lot of great experts. Had I not terminated that terrible deal, I was so honored to do it. I was so proud to do it.

It was so bad right from the beginning. Essentially, I did what no other president was willing to do. They made mistakes, and I am correcting them. My first preference was always the path of diplomacy, yet the regime continued their relentless quest for nuclear weapons and rejected every attempt at an agreement.

For this reason, in June, I ordered a strike on Iran’s key nuclear facilities in Operation Midnight Hammer. Nobody has ever seen anything like it. Those beautiful B-2 bombers performed magnificently.

We totally obliterated those nuclear sites. The regime then sought to rebuild their nuclear program at a totally different location, making clear they had no intention of abandoning their pursuit of nuclear weapons. They were also rapidly building a vast stockpile of conventional ballistic missiles and would soon have had missiles that could reach the American homeland, Europe, and virtually any other place on Earth.

Iran’s strategy was so obvious. They wanted to produce as many missiles as possible, and they did, with the longest range possible. They had some weapons that nobody believed they had. We just learned that out. We took them out. We took them all out so that no one would really dare stop them. And they’re raised for a nuclear bomb, a nuclear weapon, a nuclear weapon like nobody’s ever seen before.

They were right at the doorstep. For years, everyone has said that Iran cannot have nuclear weapons, but in the end, Those are just words if you’re not willing to take action when the time comes. As I stated in my announcement of Operation Epic Fury, our objectives are very simple and clear.

We are systematically dismantling the regime’s ability to threaten America or project power outside of their borders. That means eliminating Iran’s navy, which is now absolutely destroyed, hurting their Air Force and their missile program at levels never seen before, and annihilating their defense industrial base. We’ve done all of it.

Their Navy is gone.

Their Air Force is gone.

Their missiles are just about used up or beaten.

Taken together, these actions will cripple Iran military, crush their ability to support terrorist proxies, and deny them the ability to build a nuclear bomb. Our armed forces have been extraordinary. In anything like it, militarily, everyone is talking about it.

And tonight, I’m pleased to say that these core strategic objectives are nearing completion.

As we celebrate this progress, we think especially of the 13 American warriors who have laid down their lives in this fight to prevent our children from ever having to face a nuclear Iran. Twice this past month, I have traveled to Dover Air Force Base. And it’s been something. I wanted to be with those heroes as they returned to American soil. And I was with them and their families, their parents, their wives, their husbands.

We salute them, and now we must honor them by completing the mission for which they gave their lives.

And every single one of the people, their loved ones said, please, sir, please finish the job. Every one of them. And we are going to finish the job, and we’re going to finish it very fast. We’re getting very close.

I want to thank our allies in the Middle East, Israel, Saudi Arabia, Qatar, the UAE, Kuwait, and Bahrain. They’ve been great, and we will not let them get hurt or fail in any way, shape, or form. Many Americans have been concerned to see the recent rise in gasoline prices here at home. This short-term increase has been entirely the result of the Iranian regime launching deranged terror attacks against commercial oil tankers in neighboring countries that have nothing to do with the conflict. This is yet more proof that Iran can never be trusted with nuclear weapons. They will use them, and they will use them quickly.

It would lead to decades of extortion, economic pain, and instability worse than we can ever imagine. The United States has never been better prepared economically to confront this threat. You all know that we built the strongest economy in history.

We’re going through it right now, the strongest in history. In one year, we’ve taken a dead and crippled country. I hate to say that, but we were a dead and crippled country after the last administration, and made it the hottest country anywhere in the world by far, with no inflation, record-setting investments coming into the United States, over $18 trillion, and the highest stock market ever, with 53 all-time record highs in just one year. It all positioned us to get rid of a cancer that has long simmered. It’s known as the nuclear Iran.

And they didn’t know what was coming.

They’ve never imagined it.

Remember, because of our Drill Baby Drill program, America has plenty of gas.

We have so much gas.

Under my leadership, we are number one producer of oil and gas on the planet without even discussing the millions of barrels that we’re getting from Venezuela.

Because of the Trump administration’s policies, we produce more oil and gas than Saudi Arabia and Russia combined. Think of that. Saudi Arabia and Russia combined.

And that number will soon be substantially higher than that. There’s no country like us anywhere in the world, and we’re in great shape for the future. The United States imports almost no oil through the Hormuz Strait, and won’t be taking any in the future. We don’t need it. We haven’t needed it, and we don’t need it. We’ve beaten and completely decimated Iran. They are decimated, both militarily and economically and every other way. And the countries of the world that do receive oil through the Hormuz Strait must take care of that passage.

They must cherish it. They must grab it and cherish it.

They can do it easily. We will be helpful, but they should take the lead in protecting the oil that they so desperately depend on.

So to those countries that can’t get fuel, many of which refuse to get involved in the decapitation of Iran, we had to do it ourselves. I have a suggestion.

Number one, buy oil from the United States of America.

We have plenty. We have so much. And number two, build up some delayed courage. Should have done it before. Should have done it with us, as we asked. Go to the Strait and just take it. Protect it. Use it for yourselves. Iran has been essentially decimated. The hard part is done, so it should be easy. And in any event, when this conflict is over, the strait will open up naturally. It’ll just open up naturally. They’re going to want to be able to sell oil because that’s all they have to try and rebuild. Resumed the flowing, and the gas prices will rapidly come back down.

Stock prices will rapidly go back up.

They haven’t come down very much, frankly. They came down a little bit, but they’ve had some very good days over the last couple of days. We’ve done, actually, much better than I thought. But we had to take that little journey to Iran to get rid of this horrible threat. With our historic tax cuts, where people are just now talking about receiving larger refunds than they ever thought possible, They are getting so much more money than they thought. That’s from the great, big, beautiful bill. Our economy is strong and improving by the day, and it will soon be roaring back like never before. It will top the levels that it was a month ago.

I’ve made clear from the beginning of Operation Epic Fury that we will continue until our objectives are fully achieved. Thanks to the progress we’ve made, I can say tonight that we are on track to complete all of America’s military objectives shortly, very shortly. We are going to hit them extremely hard over the next two to three weeks. We’re going to bring them back to the Stone Ages, where they belong.

In the meantime, discussions are ongoing. Regime change was not our goal. We never said regime change, but regime change has occurred because of all of their original leaders’ death. They’re all dead. The new group is less radical and much more reasonable. Yet, if during this period of time no deal is made, we have our eyes on key targets. If there is no deal, we are going to hit each and every one of their electric generating plants very hard and probably simultaneously. We have not hit their oil, even though that’s the easiest target of all, because it would not give them even a small chance of survival or rebuilding. But we could hit it, and it would be gone, and there’s not a thing they could do about it.

They have no anti-aircraft equipment. Their radar is 100 percent annihilated.

We are unstoppable as a military force. The nuclear sites that we obliterated with the B-2 bombers have been hit so hard that it would take months to get near the nuclear dust and we have it under intense satellite surveillance and control. If we see them make a move, even a move for it, we’ll hit them with missiles very hard again. We have all the cards. They have none.

It’s very important that we keep this conflict in perspective. American involvement in World War I lasted one year, seven months, and five days. World War II lasted for three years, eight months, and 25 days. The Korean War lasted for three years, one month, and two days. The Vietnam War lasted for 19 years, five months, and 29 days. Iraq went on for eight years, eight months, and 28 days.

We are in this military operation, so powerful, so brilliant, against one of the most powerful countries for 32 days.

And the country has been eviscerated and essentially is really no longer a threat. They were the bully of the Middle East, but they’re the bully no longer. This is a true investment in your children and your grandchildren’s future. The whole world is watching, and they can’t leave the power, strength, and brilliance. They just can’t believe what they’re seeing. They leave it to your imagination, but they can’t believe what they’re seeing, the brilliance of the United States military.

Tonight, every American can look forward to a day when we are finally free from the wickedness of Iranian aggression and the specter of nuclear blackmail. Because of the actions we have taken, we are on the cusp of ending Iran’s sinister threat to America and the world. And I’ll tell you, the world is watching. And when we do, when it’s all over, the United States will be safer, stronger, more prosperous, and greater than it has ever been before.

May God bless the men and women of the United States Armed Forces, and may God bless the United States of America.

Thank you very much, and good night.

Please Support Independent Journalism

The JOLTS data also suggests that, contrary to what the ADP report showed for January, the jobs recession may be about to end, although any extrapolation along those lines must wait until we have the February data to compare to the February Employment Situation Summary especially. If the February JOLTS report mirrors that jobs data, then the jobs recession is in fact getting even worse.

Now the February report is out, and we have our answer. February’s JOLTS report shows the job recession getting worse, although the Bureau of Labor Statistics does its usual job of obfuscating that reality.

The number of job openings was little changed at 6.9 million in February, the U.S. Bureau of Labor Statistics reported today. Over the month, hires decreased to 4.8 million, and total separations changed little at 5.0 million. Within separations, quits (3.0 million) were little changed while layoffs and discharges (1.7 million) were unchanged.

What the report glosses over: job openings fell, and separations fell by less than hires.

February’s JOLTS data does an excellent job of confirming that February’s Employment Situation Summary was every bit as “fugly” as it appeared.

The jobs recession is in fact getting even worse.

Please Support Independent Journalism

Everything Down

The JOLTS report is, unlike many of the BLS data sets, is a marvel of simplicity. It revolves around the reported numbers of job openings, hires, and separations each month.

In February, all three base metrics dropped.

The drop in hiring was particularly dramatic, outpacing separations significantly.

With hiring dipping below the level of separations, net hiring went negative (again).

Even when we focus on the private sector, net hiring was still negative for the month.

The decline was merely the latest downward shift in a trend of shrinking net hiring the dates back to 2021.

The United States has been hiring fewer and fewer people each month—which means creating fewer and fewer actual jobs—since before the 2022 hyperinflation cycle.

The net hiring data alone reduces recent corporate media claims about labor market “stability” to utter absurdity. Even corporate media outlets appeared to realize this, jettisoning the “stability” narrative from last week’s unemployment claims data for freshly minted concerns about the lack of labor market “churn”.

Listless hiring and labor hoarding mean the all-important “churn” needed for a healthy labor market and healthy economy has ground to a near-halt.

However, that labor market “churn” was decreasing has been self evident in the JOLTS data since 2021.

The steady decline in “quits”—voluntary separations—relative to layoffs and terminations has been another indication that labor markets were getting progressively softer, less healthy, and more toxic.

Media propaganda aside, Wall Street has known this, but still was caught off guard with the actual job openings figure coming in well below the Wall Street consensus forecast.

Simply put, February was a month where nearly everything was down on the JOLTS.

Please Support Independent Journalism

No Relief In Any Sector

Nor were there any bright spots to be found in the sector level data.

Manufacturing continued hemorrhaging jobs.

Construction, which had shown some hiring strength in recent months, reversed into job loss.

Among service positions, Trade, Transportation and Utilities led the downturn, with Professional and Business Services as well as Leisure and Hospitality also reversing into declines.

Even normally strong Healthcare abruptly weakened in February, barely showing any job growth at all.

The one sector where employment grew significantly is the one sector many wish would never show any job growth: Government.

February was a month when we got none of the job growth we wanted and only some of the job growth we didn’t want. That is not a good outcome for any jobs report.

Please Support Independent Journalism

Confirms February Employment Situation Summary

Last month, I pointed out the February JOLTS report would present in one of two ways: the JOLTS data could track the ADP report, or it could track the BLS jobs report. For February, it again largely tracked the BLS jobs report.

While the JOLTS report tends moderate some of the volatility within the jobs data, the shifts up and down broadly align with the Employment Situation Summary.

To a degree, we should expect this: both surveys are measurements of what should be the same underlying data—i.e, employees. Still, confirmation of the Employment Situation Summary data is not at all comforting, given the decline in overall employment that report has printed since the start of 2025.

As if to add insult to injury, corporate media also took pains to point out that the hiring rate on the February JOLTS was the worst since the COVID Pandemic Panic—and of course it was all President Trump’s fault (even though most of the decline from peak hiring in 2022 happened under Joe Biden).

Economist Heather Long of the Navy Federal Credit Union, came close to using the term I have been using for over a year—“jobs recession”—describing the lack of job creation as a “hiring recession.”

“This is a hiring recession,” Long wrote in a social media post. “And Americans are feeling it. There were notable hiring pullbacks in February in hospitality and construction. Bottom line: The job market was already frozen before the war in Iran began. It’s worrying that a ‘no hire, no fire’ situation could turn into a ‘no hire, start to fire’ job market quickly if there isn’t a resolution soon.”

The term “jobs recession” has gained some traction among the presumed “experts”, as Moody’s Chief Economist Mark Zandi embraced the term last December. Whether labeled “jobs recession” or “hiring recession”, even the mainstream economists who have ignored the softening jobs data for the past few years are coming around to the reality that data is describing toxic and increasingly dysfunctional jobs markets increasingly vulnerable to employment shocks and dislocations.

Without hiring to compensate, if there is any uptick in layoffs and terminations, the impact on labor markets will be extremely negative. The labor market “churn” corporate media correctly laments is missing provides a valuable buffer which mitigates much of the impact of any increases in forced labor separations.

In every aspect, the February JOLTS data confirmed the worst parts of the February BLS jobs report. The JOLTS data confirmed what many people already know just from their own experiences: job markets in the United States are high on suckage and low on actual jobs.

Please Support Independent Journalism

Prelude To Stagflation?

One thesis for which I get some pushback is my estimation of the potential for a stagflationary episode in the US economy.

I am convinced there is a significant stagflation risk that is becoming more pronounced with major global events such as the war with Iran producing major economic dislocations worldwide. However, with “official” unemployment still fairly low, there is a tendency among mainstream “experts” and those who blindly accept their pronouncements to simply follow Fed Chair Jay Powell’s lead and ignore those stagflation risks for the US. Official employment is low, inflation is as of last month still low (that is about to change), so why worry?

That perspective presumes that unemployment is really as low as the “official” metric claims. As I have argued many times, the real unemployment rate is likely quite a bit higher, which we can see even if we add back just those not in the labor force but who want a job now.

Even with the decline in separations on the JOLTS report, the long term trend for joblessness in this country is rising.

Rising joblessness should be a major red flag, particularly at this juncture. With soaring oil prices, rising and elevated joblessness is a deflation indicator that sets the stage for stagflation. The missing ingredient is an inflationary price shock—which we may already have received as a result of the war with Iran.

Soft labor markets and some very nasty oil price shocks are what gave us stagflation in the 1970s.

We have soft labor markets. We are about to have a very nasty oil price shock.

Will we have a repeat of 1970s stagflation?

Already, if we start with “real” unemployment and add in existing year on year inflation, we get a “misery index” value that is at the same level as it was using the official unemployment rate back in 1973.

We know that there will be a burst of energy price inflation for March and most likely for April as well. Given the magnitude of recent spikes in energy prices, that much is inevitable. Nor is there any assurance the price spikes will be confined to energy, as energy consumption permeates the whole of every economy worldwide.

That burst of inflation means the March misery index values will be higher than they are now—not “may be”, but “will be”. That outcome is all but guaranteed. April will not be any better and potentially will be even worse.

If the March BLS jobs numbers show the US economy shedding jobs across the board, pushing real unemployment higher, the misery index will rise on that as well.

While we are not right this moment in a stagflationary cycle, we do not need very large pulses of either inflation or unemployment to move us into data ranges very close to the levels of the 1970s, when “stagflation” became a word. We are considerably closer to that level of economic dysfunction than many of the economic “experts” on Wall Street or in the Washington bureaucracy are willing to admit.

We have soft labor markets. We are about to have a very nasty oil price shock.

The fundamental predicates are likely to be met with the March data.

If oil prices quickly return to their pre-war levels, the stagflation risk in the economy will quickly fade as well.

If oil prices do not quickly return to their pre-war levels, the stagflation risk in the economy morphs into a stagflation certainty.

The February Employment Situation Summary showed us yet again that the jobs markets in this country are deteriorating and declining.

The February JOLTS data shows us the Employment Situation Summary data is not exaggerating just how tight and toxic US job markets are.

Add to that a large burst of consumer price inflation and the outcome starts to look very much like the stagflation we saw in the 1970s.

We are already there. We are at the same misery index levels that marked the start of stagflation in the 1970s. The question now is not whether we will reach that threshold, but how far past it will we go, and for how long?

Please Support Independent Journalism

Late last week, Iraq announced it was declaring “force majeure” for all oilfields developed and operated by foreign oil interests. That same day President Trump issued an ultimatum to the Khamenei regime: surrender now or Iran’s power plants woud be destroyed. Iran responded by threatening oil and natural gas production across the Persian Gulf region.

Oil, which had been stabilizing around $100/bbl for Brent Crude, soared yet again. Stock markets in turn dropped dramatically.

Yesterday morning came the news that President Trump and the Iranians were “talking”, leading Trump to postpone any deliberate targeting of the Iranian power grid.

Such has been the chaos of Operation Epic Fury over the past few days, whipsawing from the fallout of war, to major escalation, to possibly a chance for peace.

Do we know how this war will end? No, we do not. We cannot extrapolate with any certainty along any lines to project a final outcome. How this war ends is not merely unknown, it is completely unknowable.

Please Support Independent Journalism

Arab Oil Production At Risk

There was little doubt that the global economic fallout from this war was intensifying when the Iraqi Oil Ministry, in a letter dated March 17 and made public March 21, declared “force majeure” on all foreign-operated oil fields, ordering a complete halt to all production.

Iraq’s Oil Ministry sent a letter dated March 17, seen by Reuters, stating that navigation through the Strait of Hormuz has been severely affected by “unprecedented military activity,” causing storage capacity to reach its limits.

“The international partners were unable to nominate tankers to lift crude, preventing exports despite the state oil company SOMO being ready to load shipments,” the letter said.

“Based on the situation, the ministry ordered a full shutdown of production at affected concession areas, with no compensation arising from the measure under contract terms,” the letter noted.

Iraq’s oil output was promptly slashed by 70%, to 900,000 barrels per day.

Iraq’s declaration underscores one of the logistical realities of oil production: oil wells depend on being able move the oil to someplace else. When oil shipments are disrupted, not only does oil not get to its intended destination, but the backlog can quickly extend back to the wellhead, as oil storage capacity is filled. When there is no more spare oil storage, oil producers have no choice but to shutter at least a portion of production capacity.

While Iraq’s force majeure declaration was the most dramatic, it was not the first disruption of oil production attributed to the war. Earlier last week it was reported that Saudi Arabia had reduced its oil output by 20% because of the war.

Middle East Gulf oil producers have had to shut vast volumes of production ‌due to ⁠the blocking ⁠of the Strait of Hormuz, a narrow waterway between Iran and Oman, since the U.S. and Israel began airstrikes on Iran on February 28. Iran has said the world should prepare for oil prices at $200 a barrel.

It is one thing for oil tankers to be delayed on either side of the Strait of Hormuz. Such disruptions are, by their nature, temporary. All that is needed is a solution which can move tankers through the Strait.

It is quite another thing, however, when storage capacity at the oil terminals around the Persian Gulf is exhausted, and oil wells are obliged to stop pumping oil

While stopping the pumping process is fairly simple, restarting a stopped well is not nearly so straightforward. Once an oil well is shut down, a number of hurdles to restarting production tend to emerge, and will get worse the longer the well is shut in.

Some of those hurdles include precipitates such as paraffin, which can block the well itself. If the well is not filled with protective fluids, ground water and other external fluids can corrode and damage the well. There is even a risk of microbial contamination, necessitating particular care during well restart.

Iraq declaring “force majeure” over 70% of its oil production was tantamount to removing for the foreseeable future over 2 million barrels of oil output per day from global supply.

As I noted at the time of Iraq’s declaration, Iran’s asserting control over the Strait of Hormuz threatens Persian Gulf oil production in at least the near term:

An extended blockade of the Strait of Hormuz does not merely temporarily delay oil shipments. It threatens a long-term reduction in oil production capacity in the Persian Gulf, a reduction which will not be immediately eliminated once the blockade is even partially ended.

This is what Iran has done.

The near-term implications of Iran’s strategic decision regarding the Strait are nothing short of apocalyptic for the Persian Gulf. If Iran continues to retain control over the international waterway, Persian Gulf oil flows could stop altogether.

Please Support Independent Journalism

“48 Hours”

President Trump, faced with Iran continuing to threaten not only oil shipments from the Persian Gulf but oil production itself, responded in typical Trumpian fashion, escalating matters by issuing an ultimatum to Iran, posted via Truth Social: reopen the Strait of Hormuz in 48 hours or the US will begin bombing Iran’s power grid.

Iran responded in almost laconic fashion, with the Mehr news agency releasing a statement that said simply: “say good-bye to electricity.”

The outlet wrote, “Say goodbye to electricity,” and said that “with the smallest attack” on the Islamic Republic’s power infrastructure, “the entire region will fall into darkness.”

The statement was accompanied by a map showing the locations of major Arab power plants, highlighting how they were all within range of Iranian drones and missiles.

After Iraq’s force majeure announcement, and the earlier Saudi shuttering of its oil production, the apocalypse being threatened collectively by Iran and the US was more stress than oil markets were willing to tolerate. Brent Crude, which the week before had flirted with $120/bbl, surged towards that threshold again.

The timing of events was especially ironic, given that Federal Reserve Chairman Jay Powell had on Wednesday foolishly scoffed at the prospect that we might see a return of “stagflation”.

Even before the events of last weekend, it was clear that the war’s risks to the global economy were not insignificant.

Soft labor markets and some very nasty oil price shocks are what gave us stagflation in the 1970s.

We have soft labor markets. We are about to have a very nasty oil price shock.

Will we have a repeat of 1970s stagflation?

The surge in gas prices which has already occurred alone make for a severe price shock, potentially enough to usher in a stagflationary episode.

Wall Street looked at the potential energy crisis looming as a result of US and Iranian brinksmanship and accelerated its downward trend.

While it continues to be true that, as I have said previously, the US and Israel have for all intents and purposes won the war militarily, and have destroyed nearly every military target of significance in Iran, having an oil price shock of ever increasing magnitude bearing down on the global economy is not an outcome anyone would be able to sell as winning in a geopolitical sense.

Was President Trump on the verge of having won every battle with the Iranians—if the non-stop bombing can indeed be called a “battle”—only to lose the war itself?

Over the weekend, that was far from a radical or fringe interpretation of events.

Please Support Independent Journalism

“We’re Talking”

Yesterday morning, President Trump managed to flip the script yet again, posting on Truth Social that he had extended his ultimatum by five days, as a result of “productive” talks with Iran over ending the war.

And just like that, the price of oil dropped like a stone.

The optimism was infectious, as equities surged.

Apparently, there is no good news quite so pleasing to hear as an announcement that the Apocalypse is being postponed.

Never one to be satisfied with a linear narrative and an obvious geopolitical plus, Iran has reacted to Trump’s announcement by calling it a fabrication, denying that any talks were taking place.

Foreign Ministry spokesman Esmaeil Baghaei insisted Iran’s positions had not changed regarding the Strait of Hormuz.

In comments shared by the state news agency IRNA, Baghaei said: “Messages have been received from some friendly countries regarding the US’s request for negotiations to end the war.”

Iran responded by giving warnings about “the dire consequences of any attack on Iran’s vital infrastructure”, Baghaei said.

Iranian parliament Speaker Mohammad Bagher Ghalibaf, believed to be the person engaging with US Special Envoy Steve Witkoff, was similarly emphatic:

There is, of course, no way to independently verify the claims on either side, especially regarding which side made the first diplomatic overture. Both sides would clearly benefit from a peaceful resolution of this war—or at least a ceasefire—and yet both sides have powerful political reasons for not being perceived to be the one who backed down before the other.

What we know is that President Trump has issued a five-day delay, presumably in order to give peace a chance.

What we know is that Wall Street was quite relieved to hear that the Trump Administration were talking.

What we know is that Wall Street investors prefer a narrative of President Trump looking to “do a deal” with Iran over one of Donald Trump threatening to eradicate Iran’s vital infrastructures. For the moment, at least, President Trump has given them that narrative.

Please Support Independent Journalism

Check Your Assumptions

Wall Street is frequently a useful bellwether for gauging how various geopolitical events are being received. Movements in oil prices tell us how investors assess the risks of oil supply dislocations as a result of the war. Movements in equities are a useful proxy for gauging investor sentiment—and, by extension, public sentiment—surrounding the war with Iran (or any other major event).

Wall Street responses are by no means a measure of information accuracy, but they do provide context for the media narratives by which the details surrounding the war are presented.

Ironically, the one asset class which has not performed well during the entire war is one we would expect to be doing extremely well: gold and precious metals.

Gold has long been considered as a hedge against inflation and geopolitical risk. Especially when war breaks out, we typically expect the price of gold to rise, as it did during the opening stretch of Russia’s invasion of Ukraine.

However, after a fleeting “flight-to-safety” moment at the very beginning, as Wall Street sentiment on the war has soured, gold as well as silver prices have dropped.

What has been the preferred “flight-to-safety” investment as the war with Iran has unfolded? Suprisingly, it has been dollars. On forex markets the Dollar Index has been climbing steadily since the start of Operation Epic Fury.

It is worth noting that forex investors responded to Trump announcing “productive” talks with Iran yesterday morning by dumping dollars. Peace prospects apparently do not contribute to the strength of the dollar.

These counterintuitive asset movements in response to evolutions in the war lend a vital perspective to assessing events as they unfold, as they are a constant reminder to check assumptions and question narratives. We do not expect gold to lose value during a geopolitical crisis, and during a war especially. We do not expect the dollar to become an attractive forex play when the United States decides to start a war. Yet these things have happened.

Whatever cherished assumptions and narratives people think are true about the Middle East as well as Donald Trump, people do well to check those underlying assumptions and question those prevailing narratives.

Please Support Independent Journalism

Nobody Knows

The challenge of chaos and confusion is that they make any sort of rational extrapolation of current events impossible. While we can assess probable outcomes if certain shifts are maintained, we can have no confidence that any shift will be maintained. Events just of the past few days have demonstrated just how fluid things continue to be within this war.

Will there be a peace deal struck between the Trump Administration and the Khamenei regime in Tehran? Nobody knows.

Are there actual talks taking place between members of the Khamenei regime and the Trump Administration? Nobody knows—certainly nobody outside of the Administration or the regime.

Will this war end in a geopolitical victory for Donald Trump, a defeat, or a stalemate? Nobody knows. There are simply too many unknowns (both known and unknown) to allow us to assess with any degree of confidence how they will get resolved. We do know that partisan assessments have already decided that President Trump has already either won or lost this war (depending on the political orientation of the one doing the assessing), but that sort of goal-seeking exercise sheds no real light on how much geopolitical influence Donald Trump and the United States might have gained or lost as a result of this war.

Will Iran’s moves compel the Arab states to move closer to the US and Israel, or to Iran? Nobody knows. Much hinges on whether the Arab states in the Persian Gulf region determine the dangers threatening their countries are more the handiwork of President Trump or of the Iranian regime.

If President Trump emerges from this war with a clear geopolitical win, it is reasonable to assess that perceptions of American strength and dominance worldwide will increase. Yet what if the outcome is not a clear geopolitical win? Will American strength be seen as diminished?

If the mullahs in Tehran survive this war and remain in control of Iran, is that enough for them to claim victory? It certainly seems likely they will at least make the claim, although the credibility of that claim is likely to be at least problematic.

If the mullahs in Tehran remain in control, does that mean the war has ended in a draw? Certainly that is a tempting conclusion to reach.

Will there be a popular uprising in Iran that topples the Khamenei regime? President Trump called for one in his very first address after the start of Operation Epic Fury, and there is little doubt that he would like to see the Iranian people dismantle the regime. However, as of this writing, no insurgency has erupted within Iran.

Could the bombings end, the kinetic operations cease, and there be a space of some months before a popular insurgency displaces the Khamenei regime? We cannot know if that would happen, although is certainly one possible scenario. If during the summer months the Khamenei regime were overthrown, President Trump would arguably deserve at least some credit for crafting an opportunity for the Iranian people to rise up.

Yet we also cannot dismiss the possibility that the mullahs remain in charge, and that there is no insurgency. We cannot dismiss the possibility that such an outcome may diminish Donald Trump’s overall political capital, both domestically and globally.

Virtually every conceivable scenario for what happens next in this war remains very much on the table. Virtually every conceivable scenario could be what happens next in this war.

Which of those scenarios will we see unfold? Nobody knows.

Please Support Independent Journalism