The Iran MOU Is Dead. Now What?

Finance U Public Finance U
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Originally published at: The Iran MOU Is Dead. Now What? – Peak Prosperity

Well, that was fast. The MOU between the US and Iran has been declared dead by Trump, and both sides are back shooting at each other.

The Strait of Hormuz (SoH) was effectively closed again, and oil shot up in price (briefly) while equities went down (also, briefly).

The risks are obvious and large. Yet somehow, the price of oil cannot manage to stage more than a 1-hour-long ‘rally’ before finding an endless wall of paper futures market oil sellers.

The problem with holding the price of oil down? That only serves to keep demand up, which means inventories are being depleted.

Oil + Product inventories, combined, have never been this low, especially for this time of the year (with full summer driving demand still to come).

Meanwhile, the ‘crack spread’ is not just elevated, but has blown out to all-time highs, signaling the exact opposite of falling oil prices. The crack spread is screaming “physical product tightness!’ at the top of its lungs.

Part of the reason that tightness exists in the US is because it is exporting record amounts of refined products to the rest of the world:

Either the SoH is fully reopened, and soon, or the world is going to have to confront the reality of declining inventories the hard way. The only choices will be vastly higher energy prices or enforced rationing. Neither is a good option.

Japan and Korea

Japan is facing serious monetary and fiscal difficulties at present. The yen has fallen past the 161 mark, and is the weakest it’s been against the dollar since November 1986.

But Japan’s bond yields are also blowing out to the upside at the same time, seriously compounding the difficulties the Bank of Japan is facing. Again, there really aren’t any good options left for the BoJ, they will have to pick their poison.

Nearby, South Korea’s stock market, as measured by the KOSPI index, underwent one of the most explosive departures from a trend channel that’s been in place since 1960. It’s not just a little bit above the channel, but miles above it.

But the above chart is from June 2026. Here’s the KOSPI in July 2026:

Pow! It seems that the bubble has burst.

Long Bonds

Japan’s struggles with its long bond rates are being shared broadly across the developed economies.

Paul and I discussed the many reasons this might be happening, but perhaps the simplest is that investors do not want to hold long-dated government paper at these yields.

We discussed how more printing seems to be in the cards, as well as profound fiscal mismanagement by the involved governments.

However, higher bond yields are simply not what the governments or central banks want (or can afford). So what their next steps might be are worth watching because those actions will set the stage for the next period of returns.

Conclusion

The combination of escalating geopolitical conflict, tightening energy supplies, elevated asset valuations, and growing stresses in global financial markets creates one of the highest-risk investment environments that Paul and I have encountered in decades.

We’re in a period of classic late-stage bubble behaviors. Investors are encouraged to rebalance portfolios, harvest gains, and reduce exposure to overvalued assets rather than relying on passive investing.

But we get it. Staying out of the pool while the party is raging is emotionally difficult. Fear of missing out (FOMO) often overrides prudent decision-making during speculative market peaks.

This is why having a solid plan is a must.

 

Timestamps

00:40 Geopolitical Tensions and Market Reactions
04:30 Economic Implications of Oil Supply Disruptions
10:55 The Impact of Global Conflicts on Oil Prices
17:53 Risk Management in Uncertain Markets
26:16 Government Policies and Market Reactions
33:26 Navigating Market Risks and Strategies
36:54 The Outside-In Approach to Market Analysis
39:54 Japan’s Economic Challenges and Currency Control
43:57 The Ripple Effects of Japan’s Financial Instability
48:04 South Korea’s Market Dynamics and Investor Behavior
51:53 Understanding Market Cycles and Emotional Investing
01:04:11 Rising Long Bond Yields: A Global Concern
01:11:37 The Risks of Long-Term Government Bonds
01:18:51 The Future of Gold and Currency Dynamics
01:25:51 Selling National Assets: A Dangerous Trend

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Long time no see, I hope you had a good time fishing. Just one more before SHTF.

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The oil market and all the insane shorts make complete sense when we enter the biggest financial depression in centuries. I believe the 29 Great Depression will relinquish its title to the 2026 hands down. The need for oil will drop precipitously when there is virtually no functioning economy.
This was a race to institute the Control Grid/AI before all hell broke loose.
Right now, it’s anybody’s game but either way the plebs are going to take it solidly in the posterior.

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Anyone thinking of changing their alert level?

https://tribe.peakprosperity.com/t/what-level-of-alert-are-you-at-presently/47918?u=tianamarie

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International waters are open to all nations for peaceful navigation, commerce, and operations.

I am actually okay with these strikes on the basis that Iran is targeting civilian shipping navigating the Strait of Hormuz.

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Well that makes some sense, it does give a reasonable answer for the ridiculous shorting going on. Will put that one on the back burner and see how it stews.

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oh yes, as the commitment to war ramps up, I am purchasing more emergency food supplies. I gave them a chance, they forfeited it. It’s escalation as far as the eye can see. I am calling it Def Con 2

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I think that former U.S. Special Forces officer, Michael Yon, would say that what the U.S. is doing in Iran, the Philippines and Australia are part of a “Shaping Operations”?

Military Statecraft and the Rise of Shaping in World Politics by Kyle J. Wolfley (2021/2024 editions)

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I may get a set of Pointed Ears as a big self-promotion Gimmick….

“Fascinating.”

  • Mr. Spock

It looks like the Americans and the Europeans and the Japanese are starting to Panic?

There is the historical phenomenon of “Imperial Panic” as one country rises and eclipses the existing Empire.

I hope that China succeeds in negotiating a path through to a peaceful future?

The Good News is that China seems to have a comprehensive Diplomatic, Economic, and military strategy that is both bold, yet entails a lot of Forbearance? Not sure….

It should create a lot of Opportunities?

In any case, it’s a Fascinating time to be alive….

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Is there something wrong? The playback keeps freezing up. Full stop.

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Between 1961 and 1968 the Bretton Woods central banks conspired informally to keep the price of gold fixed at $35 an ounce. It was literally sleight of hand and not some magic economic principles at work, to serve political ends.

Lots has changed, but the motives here with oil prices in the U.S. seem to be a politically motivated sleight of hand, not some hidden economic gears turning. In this case, the political cause is to allow for an economic war of attrition to carry on.

So long as the U.S. can slide tankers out of the Persian Gulf every week or two with Iraqi oil aboard, we have a long way to go until the U.S. has to start rationing oil and staving off government collapse.

All the “peace talks” are not worth paying attention to. On the ground intell. about the SPR, Iraqi oil exports, definitely are.

Additionally, the IMEC is getting a reroute through Syria now (I have read).

Further, the U.S. blew up a key rail connection between Russia and Iran.

Russian ships are being blown up and shot at across the globe.

Hello. This is a World War to fortify the U.S. dollar with LNG and helium, inflate bank collateral valuations of those commodities, and demolish any rival “multipolar” world order.

It is being waged by the Trump fronted Westphalian ideologues bent on U.S. dollar dominance forever against a group of globalist “Harmonizers” (i.e. harmonizing goods, services, credit ratings, political leaders, etc.) and the Multipolarists (i.e. non-Western financial systems like Russia, China and Iran). They don’t fight on every front with equal vigor, and they all agree on certain things as well, but the battle lines appear to be drawn such that these are the combatants.

The framing of “U.S. war on Iran” is a stove-piped micro focus on what is playing out in front of us.

Westphalians versus Harmonizers and Multipolarists is a much more parsimonious narrative.

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Yes, I am in, “I absolutely do not care and I wish the collapse was already happening.” mode.

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The Chinese want to create a new Architecture for “Shaping” relations between the U.S. and China towards a peaceful outcome. (“主张构建新型大国关系：中美应通过良性战略互动化解冲突，美方需放弃傲慢与偏见。”)

Unfortunately, this might require that the U.S. dismantles its extensive, well-funded “Ant Hill” structures designed to “Shape” situations towards War?

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Which leads to Thucydides Trap…

Thucydides Trap: the severe structural stress caused when a rising power
threatens to upend a ruling one. In such conditions, not just extraordinary,
unexpected events, but even ordinary flashpoints of foreign affairs, can trigger
large-scale conflict.

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Very good video. Paul’s chart near the end does include Chinese currency.
RMB = Renminbi

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I am surrounded by deer, rabbits and kangas … my ‘emergency food’ is staying fresh until needed

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“Racing to Empty”

Do you remember the jaded, balding Baby Boomer College Professor who was invited to compete in the college, student- faculty Track & Field “220” race, and he showed up wearing shorts, sandals, a lurid Hawaiian shirt and carrying a Bloody Mary in his hand with a stick of celery in it with 2 young college girls in tow?

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… plundering the treasury?
I think the foreigners/globalists who’ve been running this country is looting everything and cashing out.
Selling the land/resources from underneath us and buying land/resources beneath the feet of unsuspecting others elsewhere.
Then, one day, we’ll get notices of rent increase or eviction notices, and realize all the public land is now private land, owned by faceless corporations.

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Aha. Paul and Chris talk about how the loss of refinery capacity and the crack spreads could be indicating a lack of refinery capacity relative to oil supply.

That appears to be a change from your July 6th confusion re low oil prices:

To which I had replied to posit that while there might be a lower than usual supply of oil, there is even lower than usual refinery capacity = low oil prices and high product prices:
https://tribe.peakprosperity.com/t/the-fat-pipe-july-6-2026-max-oil-bearishness-poking-the-bear-health-the-economy-and-grab-bag/47930/64

Glad to have helped! :wink:

As an aside/afterthought - Instead of going long oil, we probably should have gone long diesel or the like.

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