Trump's delusion is dooming us to a global economic disaster

Earlier this week, Donald Trump went on CNBC. He said this:

That’s a real quote. On CNBC. The financial network.

The one the traders watch while they’re trading.

It would be a delusional thing for Admiral Bonespurs to have said before he made the greatest geostrategic blunder since at least the Iraq War. In late April, it should trigger immediate sedation and execution of the 25th Amendment, if that were at all possible.

How did the markets react to this insanity? They didn’t crash.

They kept partying like it’s 1999.

That’s the biggest story in the world right now. Not the quote. The non-reaction. Because the quote tells you everything about the man running this war, and the non-reaction tells you everything about a market that has decided not to believe its own eyes.

The delusion is the only thing growing faster than the Trump family’s wealth right now. And the question the market refuses to price in is: where does that leave the rest of us?

Here’s what’s actually happening, while traders party

On April 17th, Iran’s foreign minister declared the Strait “completely open.” The Economist reported Brent crude dropped 10% to $90 a barrel. Within hours, Iran reversed course and attacked an Indian tanker. The market recovered only half of what it lost. It’s still $20 below its late-March high.

Traders of oil futures, the Economist notes drily, are a sunny bunch.

What they’re choosing not to see: the last tankers to cross Hormuz before the war began reached their destinations on April 20th — Malaysia and California. The buffer is burnt. There is nothing left between the world and the full force of this supply shock.

Meanwhile, this week, 34 Iranian tankers slipped past the US naval blockade — 10.7 million barrels, around $910 million in crude. One supertanker just turned off its transponder and sailed through. Trump posted that Iran is “collapsing financially.” Iran walked $910 million past our Navy.

But as Robert Pape argues, the dollar figure isn’t the point. Iran wasn’t just smuggling — it was demonstrating. It controls whether oil moves through Hormuz. Even past a US blockade. Even during a war. It doesn’t need to win. It just needs to keep its hand on the valve. And it just proved, to the whole world, that it still has it.

What the numbers actually look like right now.

Let’s go through the Economist’s accounting, because the details matter and most people haven’t seen them.

Fifty days in, the world has lost 550 million barrels of Gulf crude — nearly 2% of last year’s entire global output. Every month Hormuz remains closed, the world misses out on 7 million tonnes of LNG, worth another 2% of annual supply.

In Asia — which used to receive four-fifths of Gulf exports — the situation is already past severe. Japan’s strategic reserves will be exhausted in May. South Korea is tapering releases now. Crude stocks in Asia, excluding China, fell by 67 million barrels, 11%, in a single month. Asian refiners have slashed output by over 3 million barrels a day. That could hit 5 million in May, 10 million by July.

Fuel prices in Asian spot markets: petrol near $120 a barrel, diesel $175, jet fuel $200. Before the war, those were $80, $93, and $94. Seven countries have imposed work-from-home mandates. At least five are rationing vehicle fuel. Small miners and fishing operations without diesel stocks are working part-time. Plastics factories are shutting units because they can’t afford naphtha.

Europe, so far, has cushioned itself by subsidizing consumption, with 16 EU countries cutting fuel taxes or writing checks to shield consumers. But European refiners are now buying crude at $130-150 a barrel while being forced to sell finished product at lower futures prices. They apparently call that “backwardation,” and it’s crushing their margins. Before long, they’ll have to cut output too.

And then it reaches us. American summer driving demand is about to kick in, pushing prices further. If Washington bans refined product exports, as China already has, things get worse. Jet fuel stocks across European importing regions could disappear entirely if Hormuz flows don’t normalize by June.

The Economist’s conclusion: even if the strait reopened today, a cumulative loss of 1.5 billion Gulf barrels—5% of annual global output—is almost unavoidable. If it stays closed, double that. The last time demand fell 10% that fast was during you know what in 2020. World GDP dropped more than 3%.

The mine problem nobody wants to talk about

Even if the war ended tomorrow, a Pentagon assessment shared with the House Armed Services Committee concluded that clearing the mines takes six months. Iran placed 20 or more GPS-guided missiles across a danger zone 14 times the size of Paris. The Pentagon denied the specific number but offered no alternative.

Mine clearing can’t even start until hostilities end. London is now hosting 30+ countries to plan a coalition mission, using the phrase “once hostilities end” in every statement.

We are nowhere near that.

We are nowhere near even a fantasy of how that happens.

The only winners, oh, the irony

Here’s the dark irony. As Bill McKibben points out, the UK’s energy secretary is already using this crisis to double down on renewables — faster solar, faster EVs — and telling his country: “the era of fossil fuel security is over.”

Countries that have built out clean energy have insulation right now. Countries that didn’t are rationing diesel and closing schools.

Trump spent his entire presidency trying to lock in our fossil fuel addiction. He has now, accidentally and catastrophically, done more to accelerate the global pivot to clean energy than anyone since Al Gore.

So why is the market pricing in a clean resolution?

Back to the Venezuela quote. “I took it over in 45 minutes.” That’s not a boast. That’s a worldview. That’s the operating system running the Iran policy.

The market is betting this ends the way Trump crises usually do: a dramatic announcement, a handshake, a photo op. As I wrote, he ran this play on COVID. Perform confidence. Punish doubt. Let the virus do what viruses do. The market stayed propped until it couldn’t. Then it lost a third of its value in eleven days.

But this bet requires Trump to take a loss. And there has never been anyone worse at taking an L. He torched the Iran nuclear deal—which the IAEA had verified was working—because it had Obama’s name on it. Eight years of maximum pressure later, Iran had 440 kilograms of enriched uranium, thousands of new centrifuges, and a hand on the throat of a fifth of the world’s oil supply. The policy produced exactly the outcome the deal was designed to prevent. That’s the L. His response to the L was to launch a war. His response to losing the war was a blockade. Each move burns more credibility; each burn makes the next deal harder.

To end this, Trump has to accept a deal that leaves Iran stronger than when he took office. That’s the only shape the negotiating space has. Every analyst who has looked agrees. He cannot say that out loud, and he can’t even admit it to himself, and he threatens the delusion that makes him—in his mind—the Ronald Reagan of all Ronald Reagans while he’s in fact—according to the GOP caricature—the Jimmy Carter of all Jimmy Carters.

And every day he can’t, the world economy pays.

He’s also caught between Xi and Putin

Trump’s original plan—tracked carefully by emptywheel’s Marcy Wheeler—was an axis of authoritarianism. Putin gets Europe. Xi gets his hemisphere. Trump loots the Americas. The Iran war blew the whole architecture apart. Europe didn’t fold. The alliance he was counting on fractured the moment he needed it.

Now, Xi is sitting on 1.3 billion barrels of crude in reserve, has suspended refined product exports, and a trader familiar with China’s energy strategy says it won’t open the taps before a lasting truce. Putin was supplying Iran through the Caspian Sea backdoor. Both men have personal leverage over Trump. Neither has any incentive to help him find a clean exit.

The man who took Venezuela in 45 minutes is stuck. His friends won’t help him. His enemies are running oil past his Navy. And the market is still pricing in a miracle that resembles his delusion.

Where that leaves the rest of us

Best case: the war ends tomorrow, mine clearing starts immediately, and the strait reopens in six months. Six months of disruption minimum. That’s the best possible case.

Most likely: Iran’s parliament says the strait stays closed as long as the US blockade holds. The blockade is already proven porous. The mines are still there. And Pape is right: no state voluntarily surrenders the asset that just made the whole world treat it as a global power.

At some point, May, June, when the empty tank farms, the shuttered plastics factories, the part-time fishing fleets, and the $200 jet fuel become impossible to spin. Especially when governments start collapsing in the wreckage, as Marcy keeps predicting.

Worst of all for Trump, this—eventually—gives the world permission to ignore him. In fact, there’s probably nothing more important for anyone who takes life seriously to do right now than to ignore Donald Trump.

The gap between the 9:30 AM peace tweet and the physical reality gets too wide to trade around. He cannot tweet a mine out of the water. He cannot 45-minutes his way out of this one.

Watch the ships. Not the tweets. And watch the stocks, since that’s the only last connection to reality for Trump, which is why he was on CNBC in the first place. See how the ships just do not connect with the stocks. See who figures that out.

Forget the tweets, unless you love wading in delusion. In that case, you have a future on Wall Street.

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