The Memo: Trump at risk from oil price roller coaster amid Iran war

The war in Iran sent financial markets and energy prices on a roller-coaster ride on Monday, underlining the political challenges for President Trump in a mixed and rapidly shifting economic landscape.

Nowhere was volatility more evident than in the price of oil.

Late Sunday, oil futures rocketed by close to 20 percent, sending tremors across the globe. By late afternoon Monday, the shocking rise had been fully reversed — and more. The oil price had fallen by around 7 percent by 5 p.m. EDT.  

The same period also saw wild gyrations in financial markets.

Futures markets on Sunday night pointed to a drop of around 900 points for the Dow Jones Industrial Average on Monday. The Dow in fact ended Monday up by almost 250 points.

Political and military factors drove the price changes in both directions. The vertiginous rise in oil came amid fears over shipping in the crucial Strait of Hormuz off Iran’s southern coast, and consternation about the Islamic Republic’s elevation of Mojtaba Khamenei as supreme leader.

Khamenei follows in the footsteps of his father, Ayatollah Ali Khamenei, who served as supreme leader from 1989 until his assassination in an Israeli airstrike on Feb. 28.

The selection of Mojtaba Khamenei was seen as a gesture of defiance, suggesting the Islamic Republic is unwilling to brook compromise to end the combined U.S. and Israeli assault.

On the flip side, the sharp fall in oil prices and the stock market rally on Monday afternoon appeared to be a response to remarks Trump made in a phone interview with Weijia Jiang of CBS News.

Trump told Jiang that he felt “the war is very complete, pretty much” and that the United States attack on Iran was “very far” ahead of his initial estimate that it would last between four and five weeks.

Trump, who spent most of Monday in Florida, addressed a GOP retreat, saying of Iran, “We’ve already won in many ways but we haven’t won enough.”

A short time later, at a press conference, Trump was asked about his comments to Jiang and how they seemed to contrast with comments from Secretary of Defense Pete Hegseth, who had told CBS’s “60 Minutes” in an interview broadcast on Sunday that the current U.S. actions are “just the beginning.”

Asked by a reporter, “Which is it?,” Trump replied: “You could say both.”

The head-spinning changes in direction emphasized just how unsettled the picture has become. Trump’s often-opaque comments on the war with Iran are parsed for meanings that can send markets reeling in one direction or another.

The problem for the president is that all of this is happening against a negative backdrop. His polling numbers on the economy in general and the cost of living in particular were poor even before the crisis in Iran.

In an Economist/YouGov poll roughly one month ago, for example, just 31 percent of Americans approved of Trump’s handling of inflation while 59 percent disapproved. His rating on the economy generally was barely better, with 34 percent approving and 57 percent disapproving.

Other economic indicators are troublesome, too. The economy shed jobs in February, according to data released last week from the Bureau of Labor Statistics. The net loss of 92,000 jobs nudged the unemployment rate up to 4.4 percent.

Meanwhile, the stock market was volatile in the first months of this year, even before the effects of the war in Iran made themselves felt. As of Monday’s close, both the Dow Jones and the broader-based S&P 500 were down by roughly 1 percent for the year to date.

Mark Zandi, chief economist with Moody’s Analytics, said he remained concerned about the nation’s overall economic health amid the conflict with Iran and the concomitant effects on energy prices.

“The economy is already struggling, and this is just one more weight on it,” Zandi told this column. “With each passing day, that weight grows heavier and heavier, and threatens at some point to break the economy.”

Zandi noted some of the more bearish economic indicators, and the fact that the air of crisis was far from confined to U.S. relations with Iran.

“It’s not just Iran. You have Venezuela, Greenland, conversations around Cuba,” he said. “This feels like a never-ending series of events, and I can’t imagine businesses are digesting this gracefully.”

Trump, naturally, sees it all very differently — including the situation in Iran.

In a Sunday evening social media post, Trump contended that the “short-term” rise in oil prices would “drop rapidly when the destruction of the Iran nuclear threat is over.”

The president also contended that any brief economic pain would be “a very small price to pay for U.S.A., and World, Safety and Peace.”

Meanwhile his allies have sought to calm fears pertaining to Iran in general and shipping through the Strait of Hormuz in particular.

In a social media post on Monday evening, Trump threatened that if Iran stopped oil traffic through the body of water, “they will be hit by the United States of America TWENTY TIMES HARDER than they have been hit thus far.”

Interior Secretary Doug Burgum told Martha MacCallum of Fox News on Monday afternoon, “We don’t have a shortage of oil, we have a transit problem.” Burgum added, “We’ll do what we have to do to get the oil flowing.”

Around 20 percent of world oil supplies transit through the Strait of Hormuz under normal circumstances, but that flow has come to a near standstill amid the war.

Energy Secretary Chris Wright told CBS’s “Face the Nation” on Sunday that “more normal ship traffic” would return to the strait “in the relatively near term.”

Wright also asserted, “We have a temporary period of elevated energy prices, but it will not be long.”

As prices at the pump rise, Wright — and his boss, the president — need that prediction to come true.

For now, uncertainty and volatility are likely to endure.

The Memo is a reported column by Niall Stanage. 

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