The ceasefire lasted five days — not surprising, given there was a lack of Iranian compliance from the outset.
And we now have a U.S. naval blockade of the Strait of Hormuz.
The Iranian oil exports that had been largely traveling to China, while the rest of the world was choked off, are now under U.S. naval threat to be “immediately eliminated” (per Trump’s Truth Social post this morning).
Meanwhile, U.S. stocks closed today above pre-war levels. The S&P, Nasdaq, and Russell 2000 are now all higher. Goldman Sachs reported its second-best quarter in the firm’s history this morning. The economy is re-industrializing and tankers are traveling to America for oil and natural gas.
Germany’s DAX is 5.6% below pre-war. Rates are rising into what the ECB has already framed to be a recessionary economy, from the severe energy shock. Energy costs six times what American’s are paying. And yet the European bureaucrats are planning summits and doubling down on same failed green energy policies that created the dependency that’s crushing them.
So, one economy is booming through a war it started. The other is getting buried in the costs.
This is the boom loop and the doom loop we’ve been talking about for the past six weeks. The same war, opposite outcomes.
Though the war isn’t the cause of Europe’s economic trouble, it’s the accelerant. And simultaneously, Trump is exposing the political lack of alignment in Europe. The former will become leverage to change the latter.
We’ve been talking about this dynamic since April of last year when we identified the trade war as Trump’s strategy to draw the rest of the world back into alignment with the U.S., away from China.
And then isolating Beijing.
As we’ve discussed, it’s “all about China.“
So, Iran is the current phase. And this week, the China phase started coming into focus.
What’s going on?
>China is preparing to ship air defense systems to Iran — arming the regime the U.S. just spent six weeks dismantling. Trump’s response: a 50% tariff threat.
>China halted sulfuric acid exports, weaponizing a chokepoint of its own across fertilizer, batteries, semiconductors, and pharmaceuticals.
>Spain’s Prime Minister flew to Beijing this week with a message that there’s an alternative to Washington. And earlier this year Canada did a trade deal with China that brings cheap Chinese EVs to America’s doorstep.
>China’s Foreign Ministry responded to the blockade today by calling it “against the international community’s interests.” Again, most of Iran’s pre-war oil exports went to Beijing.
With that all in mind, Trump’s post about the blockade ended with a line that’s telling: “Our Military is Loading Up and Resting, looking forward, actually, to its next Conquest.”
Things all converge next month. A new Fed Chair arrives. And as we’ve discussed here in my daily notes, the dollar liquidity that maintains stability for Europes financial system will very likely become conditional.
Conditional on what? Alignment.
With that, the Iran campaign, if we connect the clear dots, should conclude with the way Trump mapped it out four decades ago. He will “take the oil.”
With the energy architecture in the Middle East permanently restructured, China becomes oil deficient. And the next phase comes into focus: Isolate China.
Why?
China has engaged in a multi-decade economic war. By manipulating its currency over the past thirty years (keeping it cheap), they’ve cornered the world’s export markets, gutted manufacturing industry around the world — and in the process, they have extracted from the world the largest pile of foreign currency reserves.
What have they done with those reserves?
They’ve used it to buy influence inside of countries (politicians, academia, corporate leaders, media) — growing their economic warfare into hybrid warfare.
For the Trump administration, dealing with China has been priority number one — dating back to his first term.
