Daily update
Daily update
- US President Trump said that the US International Development Finance Corporation will offer to insure tankers in the Gulf, and the US Navy will escort tankers through the Strait of Hormuz as soon as possible. It is not clear how the former would operate, or how soon the latter would happen. Markets seem unenthusiastic about this, with oil prices higher and Asian equities lower. Trump seems politically sensitive to oil prices in the context of the US affordability crisis—gasoline prices disproportionately impact inflation perceptions. Trump’s sensitivity might be important in judging the length of the war.
- A recurring problem with energy price spikes is that investors have a “folk memory” of the consequences of the 1973 OPEC oil shock. However, this is not 1973, nor yet 1990—not even 2022. Alternative energy sources, energy efficiency, and changing the composition of economies mean that reactions are not the same as the past.
- Trump declared the US would cut off trade with Spain. This has not been endorsed by other administration officials and markets are likely to ignore these remarks. The US does not trade with Spain, but with the EU.
- European January producer price inflation is due, after slightly-higher-than-expected consumer price inflation released yesterday.