Today, markets rallied on expectations that an end to the U.S./Iran war is near.
Meanwhile, the White House posted this, from Trump, on the official account:
"All of those countries that can't get jet fuel because of the Strait of Hormuz, like the United Kingdom, which refused to get involved in the decapitation of Iran, I have a suggestion for you: Number 1, buy from the U.S., we have plenty, and Number 2, build up some delayed courage, go to the Strait, and just TAKE IT. You'll have to start learning how to fight for yourself, the U.S.A. won't be there to help you anymore, just like you weren't there for us. Iran has been, essentially, decimated. The hard part is done. Go get your own oil!"'
In a separate post, he called out France for blocking military supply planes from flying over French territory.
"France has been VERY UNHELPFUL… The U.S.A. will REMEMBER!!!"
This, while eurozone inflation just printed a sharp rise from 1.9% to 2.5%, driven by the spike in European energy prices. And with European-bound cargo still stalled west of Hormuz.
The full energy shock has yet to arrive.
And that pain fuels the "doom loop" we've been discussing.
Higher energy costs in Europe squeeze the budgets of the more fiscally fragile countries.
Meanwhile, the interest rate outlook in Europe has swung from rate cuts to rate hikes by year end.
Higher rates increase debt service costs on countries like Italy (137% debt-to-GDP).
That threatens solvency, which pressures bank balance sheets, which tightens credit, which weakens the economy, which can push the fiscally fragile to the fiscally broken.
That's where the European Central Bank (ECB) would step in, armed with a June 2022 program it conceived to keep sovereign bond markets stable — to backstop the bond markets of the fiscally fragile (to prevent a fiscally broken scenario).
But the ECB's firepower is only as strong as its credibility — as the market's belief in it. And that credibility will be tested if the Trump-led Fed (coming in May) doesn't have the ECB's back.
And as we've discussed, that could be the catalyst for political change in Europe — a populist shakeup, trading diluted sovereignty, slow-to-no growth and excessive regulation for pro-sovereignty, pro-growth and deregulation.
The question: Is this "catalyst" by design?
Trump is dismantling the Iranian geopolitical weapon — energy. And in the process, he's exposing the flawed economic, security and energy architecture of the eurozone.
And remember, the U.S. National Security Strategy document we discussed earlier this year.
It called out the European Union and "other transnational bodies" for undermining political liberty and sovereignty through migration policies, censorship, and loss of national identities and self-confidence. And it explicitly questioned whether or not they were strong enough "to remain reliable allies."
Add to this, Marco Rubio's speech two months ago at the Munich Security Conference.
He didn't pull any punches. He formalized the move from "implicit" to "conditional" support — by calling out Europe's "foolish" policies on climate, migration, deindustrialization as anti-sovereignty and self-harming.
He reset the alliance on the basis of "reciprocity and seriousness."
He evoked the history of "godless communist revolutions" and terminal decline of 1940s Europe.
And he said the U.S. seeks "renewal and restoration" of Western civilization. This was an invitation to do it together — "join us."
Otherwise, the message was, Europe is not entitled to automatic U.S. backstops (Trump's leverage).
Why would the Trump administration want to see change in European leadership? To counter China's influence by restoring U.S./European alignment.
