Last week Treasury Secretary Scott Bessent promised more severe Iran sanctions:
“Watch this space for more announcements coming next week because we are going to apply measures like have never been seen in the history of economic isolation on a country,” Bessent said in an interview on on Newsmax’s “Rob Schmitt Tonight” program.
The ‘next week’ is here but no new measures have been announced.
Rumors has it that the U.S. would apply secondary sanctions on anyone buying Iranian oil. China would have been the prime target. But the Chinese have the means to retaliate. Additionally Trump is hoping for a visit by President Xi next month which, the Chinese probably let know, is unlikely to happen if he were to introduce new sanctions.
Bessent may also be busy with other problems.
Over the last six months crude future prices were obviously manipulated. The large physical deficit on the market due to the blockade of the Strait of Hormuz should have led to much higher oil prices. But talked down by the administration the prices hardly budged.
Crude prices are still too low but product prices, diesel and jet fuel, are reaching new heights. The ‘crack price’ – i.e. the difference between raw crude oil and diesel/heating oil – has reached an unprecedented spread of more than $100.
As diesel is the main cost for transportation its high price will soon leak into all other products. It is a main source of inflation.
There is also this tiny issue Bessent will have to (but lacks the means to) tackle:
Global bond yields hit multi-decade highs as governments pay the price for U.S.-Iran stalemate
A global sell-off of government bonds gripped markets Tuesday morning, sending borrowing costs to multi-decade highs, as hopes for an end to hostilities it the Middle East rapidly faded.
…
At 7:38 a.m. ET, yields on U.S. 30-year Treasurys were up almost 3 basis points to 5.335%, the highest level since 2002.
The record U.S. budget deficits, plus the enormous debt demand due to the AI bubble, are simply too much for the bond market.
Any rise in bond yields will require more interest payments for government debt which will lead to higher deficits. This can become a vicious circle. But under Donald Trump the Federal Reserve, which could raise interest rate to counter inflation pressure, is unwilling to act.
The bond market will thus expect a higher long term inflation and will demand higher yields for future debt.
Economically Trump is on his way to run the States into a wall.