Iran war hangs over Trump’s China trip: Analysis
As President Donald Trump prepares to head to China for crucial negotiations with the leader of the No. 2 global power, it is becoming clear that the political and economic damage unleashed by the Iran war can’t be easily left behind. Even if a deal to get oil tankers moving again were reached tomorrow — and there is little sign of that — Americans are facing the prospect of months or more of new inflation worries.
The question now isn’t whether Trump secure his war aims with dignity. It is whether his presidency can ever recover from the war’s body blow.
Trump is banking little political goodwill from the stock market that keeps grinding to new records. The S&P 500 has risen 7.3% since Feb. 27, just before the U.S. and Israel attacked Iran. Meanwhile Trump’s net approval rating has fallen to the lowest of his two terms, according to CNBC’s All-America Economic Survey.
Stocks are rising on faith in artificial intelligence and traders’ well-earned sense that Trump will find a way to get out from under major economic risks. But the market is fragile and could fall apart if the disruption continues, analysts with JPMorgan wrote in a note sent to clients Monday.
“A temporary shock, even a large one, can be absorbed. A prolonged disruption cannot,” the analysts wrote.
The analysts conclude that because the mounting damage is so severe, Iran or the U.S. will back off by June. That is a reasonable bet for a Wall Street firm to make, given Trump’s prominent decisions to back off on threats over tariffs and Greenland, for instance.
But the judgment that the pain will get so intense one side has to back off has grim implications for Americans already struggling to pay at the pump — not to mention Trump’s political standing.
Oil prices are — counterintuitively — relatively low at the moment, given the scale of the supply disruption. Global benchmark Brent crude futures hit $104 a barrel Monday, up 44% since the start of the war but still below the highs sparked by Russia’s invasion of Ukraine in 2022.
A gallon of gas cost $4.50 on average in the U.S. on Tuesday, up 44% compared to last May. Diesel is up 61%.
Iran has shut the Strait of Hormuz, the narrow passageway that tankers need to transit to reach the Persian Gulf, where they can fuel up in Saudi Arabia and other Middle Eastern energy giants. The closure has meant a fifth of the world’s oil supplies can’t get through the normal routes.
Those countries have gone to great strides to get oil moving again. But there is only so much they can do, Amin Nasser, CEO of the world’s largest oil producer, Saudi Aramco, said on an earnings call Monday.
“If the current disruptions continue at this rate, the market will lose around 100 million barrels for every week the Strait of Hormuz remains closed,” Nasser said.
Countries have been able to tap into existing oil inventories to keep their economies stocked with refined products like gasoline and jet fuel. But those stockpiles may be “critically…