[Today’s Iran war post below is more or less complete, but I had to run out. I expect to add a few tidbits when I return, so please return or refresh this page at 8:00 AM EDT]
We have said it would be better if we were wrong about the Iran war not ending in a negotiated settlement, But if a final deal is consummated that is tantamount to a US capitulation, one can argue that that qualifies one of the non-negotiated alternatives we had posited, that of regime change. Whether or not the US and Iran get to a final agreement, Iran has displaced Israel as the dominant power in the Middle East and the perception of US primacy all over the world has taken a major blow.
You can find the text of the Memorandum of Understanding (MOU), as read out to reporters, in Footnote 1. Trump signed it in Versailles. apparently ignorant of the ignominy of the 1918 Treaty of Versailles that ended the Great War. Keep in mind that the odds a deal will not be completed are high, and the 60 day deadline seems unrealistic, particularly given the fact that real estate hucksters and a not-terribly-seasoned Vice President are leading the US effort, plus Trump 1.0 fired many career staffers and more have exited in his second term. Alastair Crooke has pointed out that agreeing to a cessation of hostilities is easy, but once that happens, opponents go to work to pull the two sides apart. We will soon turn to Israel, since the US effectively agreed to enforce an Israel withdrawal from Lebanon, which Israel fiercely opposes. But remember that Iran’s position is that nothing is settled until everything is settled, so we will flag some other points that seem breakdown prone.
In addition, Robert Pape has stressed that global oil supplies will remain on a knife edge through the negotiating period and will actually tighten, increasing Iran’s leverage. Thus Iran’s incentives during the talks will be to be very hard nosed and to threaten to and perhaps actually re-close the Strait of Hormuz, such as if Israel fails to come to heel. Any additional interruption of traffic through the Strait of Hormuz would rattle shippers, extend the timetable for delivery of oil and normalization. That would also maintain Iran’s economic leverage if the negotiation deadline wind up being extended. Keep in mind additionally that the talks going into September could add to Trump/Republican midterm woes.
In case you harbored doubts:
Well, yes, Iran did achieve total victory https://t.co/LTPYFQPPHx
— Noah Smith 🐇🇺🇸🇺🇦🇹🇼 (@Noahpinion) June 18, 2026
The White House read the final terms of the Memorandum of Understanding out to reporters last night. As you can see below, it includes, in Paragraph 1, the US and Iran seek to bind their allies to cease hostilities, including “ensuring the territorial integrity and sovereignty of Lebanon.” That means Israel has to withdraw from Lebanon. More on that later in this post.
Paragraph 13 sequences the process, requiring the parties to start implementing Paragraph 1, 4 (end of US naval blockade; commitment to reduce force accumulation after 30 days), 5 (Iran “best efforts” to restore Strait of Hormuz traffic, with the first 60 days fee free, and to work with Oman and Gulf States on ongoing arrangements), 10 (termination of sanctions and issuance of waivers) and 11 (releasing or providing access to frozen assets) right away and, “the continuing implementation of these measures,” will negotiate the other issues. That means either party can suspend the talks or walk away entirely if they think there is a breach on any of those points.
It also seems that it will be impossible for the US to deliver on Paragraph 6:
The United States of America undertakes with regional partners to develop a definitive, mutually agreed plan with at least U.S.D. 300 billion for the reconstruction and economic development of the Islamic Republic of Iran. The mechanism for the implementation of this plan will be finalized as part of a final deal within 60 days. All required licenses, waivers and permissions needed for the relevant financial transactions will be granted by the United States of America.
Infrastructure deals are extremely complex and very high fee and would require Iran to convey title of the assets being “reconstructed” to the fund, which is na ga happen. It is hard to see how the US, which has done the Gulf States great harm with its Iran war caper, has the leverage to get them to agree to pony up most/all of $300 billion when they have their own rebuilding needs.
So what does Iran do when the US fails to deliver on this commitment? The MOU already contemplates that Iran will regularize its control of the Strait of Hormuz and presumably charge fees after 60 days. We had said that Iran likely understands full well that the US cannot satisfy this requirement and might explicitly use this to impose fees at a level designed to realize $300 billion over time (as in use this explicitly with the Gulf States as an alternative to funding reconstruction). However, Robert Pape has argued that Iran will seek to maximize its power, and its highest value “ask” is for the US to withdraw forces across the region.
Finally, I beg to differ with our esteemed Auerlien on his view of the UNSC resolution in Paragraph 14. His view had been, Third, the Iranian reference to the UNSC is probably intended to politically embarrass the US, rather than achieve anything concrete.” IMHO, following Pape, this is very important symbolically, given that Iran was on the receiving end of not just one but three attempted UNSC votes, the first passed, with a record number of co-sponsors which condemned Iran for “egregious attacks” with no mention that it was the US and Israel that had started this fight. This is a Steve-Jobs-returns-to-Apple level geopolitical statement, in the form of official statement (if also strictly speaking, symbolic) that Iran had been in the right all along.
The press is taking different postures in their headlines about the status of the MOU. Only some are making clear that this “deal” has a long way to go to get done:
From the Washington Post:
USA Today is astonishingly non-informative:
The Wall Street Journal does USA Today one better by not even putting anything about “the deal” above the fold:
Fox by contrast applies porcine maquillage heavily:
The Financial Times makes “the deal” its lead item:
And from BBC:
Bloomberg, which has consistently peddled every bit of deal hopium, refreshingly does a good job of cataloguing how far it falls short of US/Israel aims, as well as Trump’s new and improved barker patter. deal cheerleading:
President Donald Trump and his team had several red lines that they used to justify the US war against Iran. At a press conference on Wednesday, Trump largely brushed them aside.
Explaining his decision to agree to an interim peace deal, Trump repeated his insistence that the country would never get a nuclear weapon. Yet he went on to suggest that Iran should have the right to enrich uranium, be allowed to develop ballistic missiles and get access to billions of dollars in frozen funds.
Those three things have been at the center of the debate around how to approach Iran for years, dating to the 2015 agreement that the US, under President Barack Obama, and other great powers signed with Iran to limit its nuclear program….
To be sure, he [Trump] has a history of taking a hard stance only to reverse it days — sometimes even hours — later….
But there was plenty in the press conference that surprised even the president’s supporters.
Take Iran’s ballistic missile program…Defense Secretary Pete Hegseth said the US objective was to “destroy the missile threat” posed by Iran.
Trump shrugged off that idea…He even derided those offering him advice — he referred to them as “guys I like” — as focusing on the wrong thing with the fixation on ballistic missiles. “I mean, they have to have some because other people have some,” Trump said.
“Missiles aren’t the problem,” Trump told reporters. “They hurt a little location but they don’t blow up the planet.”
The president took the same approach with nuclear enrichment. For years, he and many Republican critics of Iran have questioned why it should be allowed to enrich uranium if, as it insists, it doesn’t want a nuclear weapon. Secretary of State Marco Rubio told Fox News in May that Iran needs to “walk away from enrichment.”
With Rubio standing right behind him on Wednesday, Trump made clear he no longer agreed.
“It’s a little hard when other people have it, other adjoining states have it, and you’re not letting them have it for purposes of electricity and things like that,” Trump said. “You have to use a little common sense.”
The third red line Trump crossed centered on Iran’s frozen assets. The country has billions of dollars in overseas accounts that the US has blocked banks from releasing. Part of the justification for years has been that Iran is a leading state sponsor of terrorism, funding proxy groups such as Hezbollah in Lebanon and Hamas in Gaza, and can’t be trusted not to do so again.
“It’s not our money, it’s their money — and we froze it at a certain point in time,” Trump said. “I guess we’re going to have to give it back, you know. If we didn’t give it back, nobody would ever invest in the dollar again.”
The Wall Street Journal landing page story, Trump Signs Iran Deal, Says He Wants to Avoid ‘Economic Catastrophe’, highlights why Trump folded:
Trump—who in an unexpected move signed the deal Wednesday in Versailles—said he was influenced by the stock market’s rise as he worked toward a resolution of the conflict. He said he didn’t want to be compared with former President Herbert Hoover, who was president during the 1929 market crash that led to the Great Depression.
“He was always the one I didn’t want to be,” Trump told reporters at the Hôtel Royal where he and other world leaders gathered for the Group of Seven meeting. “I didn’t want to see an economic catastrophe.”
The Journal adds that an initial day negotiation session will start in Switzerland on Friday and that Trump does not see the 60 day timeframe as cast in stone.
Oddly, the Journal did not mention the key consideration that led Trump to relent, and one we have been banging on about from some time, that of the coming energy cliff. From The Hill in Trump says oil reserves would run out in 4 weeks without Iran deal, risking ‘bedlam’:
President Trump said Wednesday that oil reserves could have run out in four weeks if the Strait of Hormuz were not opened.
“We run out of reserves at about four weeks,” Trump said in France while at the Group of Seven summit, discussing the recent memorandum of understanding with Iran. “You know, there are reserves all over the world, and we would really run out, and there’ll be a time when you wouldn’t be able to get it.”
He said it would be “bedlam” if the oil ran out.
“What this does is it allows the ships to go,” he said of the Iran deal. “If we keep bombing, those ships won’t be going.”
It’s not entirely clear whether Trump was referring to U.S. or global oil inventories. The White House declined to elaborate, referring The Hill back to Trump’s original remarks.
The “four weeks” is squarely in line with the July timeframe we have been discussing for when the oil cliff will arrive. Even though, as Jeff Currie (and our own reader vao) pointed, out, the ending of the dueling blockades will allow tankers bottled up in the Gulf to deliver their cargoes, that only provides a week to ten days of supply (note that the more Trump was accurate that the US was able to sneak a lot out under Iran’s nose, the less will be transiting out soon). So the cliff is still operative and Trump will be very eager not to have Iran make a precarious situation worse by closing the Strait of Hormuz again, with Israel intransigence the most likely trigger.
In a talk shortly before the Administration released the final language, Robert Pape described long form not only why the MOU was a US capitulation but also the energy cliff still being in play meant Iran was ideally positioned to extract more concessions over the negotiation period:
Aljazeera’s live feed at the top says Israel is not complying with the MOU:
- US President Donald Trump and Iran’s President Masoud Pezeshkian have electronically signed a memorandum of understanding to end the US and Israel’s war on Iran.
- Israeli forces continue military operations in Lebanon despite its inclusion in the US-Iran MoU.
And:
⚠️ Breaking: Israel has carried out a drone strike Kfar Tebnit, Lebanon in violation of Iran-US MoU.
— Ehsan Safarnejad (@Safarnejad_IR) June 18, 2026
Israeli minister Ben-Gvir insists Israel will continue full-force operations in southern Lebanon:
Israeli National Security Minister Ben-Gvir:
We cannot stop destroying houses in southern Lebanon. We cannot stop, period.
We cannot allow the population of southern Lebanon to return. … We must continue to control the territory even if Trump disagrees.
We are an… pic.twitter.com/vhHo7K1Ttv
— Clash Report (@clashreport) June 17, 2026
Admittedly, it is possible that Israel will leave Lebanon the hard way, by being expelled, as opposed to Iran dropping the hammer by closing the Strait of Hormuz again:
Hezbollah is currently decimating the remains of the Israeli occupation in southern Lebanon. Dozens of Israeli terrorists injured and at least 2 killed today. Nonstop Hezbollah attacks in the south now. If the IOF don’t leave in the ceasefire, they will leave in coffins.
— Hadi (@HadiNasrallah) June 18, 2026
On the economic front, Jeff Currie is doubling down on his call for much higher oil prices:
_____
📌 Islamabad Memorandum of Understanding between the United States of America and the Islamic Republic of Iran.
The text of the MOU, as read out loud on a conference call with reporters, including from NYT and The Hill, on Wednesday:
🔹Paragraph 1
The United States of America and the Islamic Republic of Iran and their allies in the current war by signing this M.O.U. declare the immediate and permanent termination of military operations on all fronts, including in Lebanon, and undertake from now on not to initiate any war or any military operation against each other, and to refrain [from] the threat or use of force against each other and ensuring the territorial integrity and sovereignty of Lebanon. The final deal will confirm the permanent termination of the war on all fronts, including in Lebanon and other provisions of this paragraph.
🔹Paragraph 2
The United States of America and the Islamic Republic of Iran undertake to respect each other’s sovereignty and territorial integrity, and to refrain from interfering in each other’s internal affairs.
🔹Paragraph 3
The United States of America and the Islamic Republic of Iran commit to negotiating and achieving the final deal in maximum 60 days extendable with mutual consent.
🔹Paragraph 4
Immediately upon the signing of this M.O.U., the United States of America will begin the removal of its naval blockade and any disturbances or impediments against the Islamic Republic of Iran, and will fully end the naval blockade within 30 days. During this period, the traffic of vessels will be in proportion to the numbers of prewar traffic being restored by the Islamic Republic of Iran. The United States of America further undertakes to remove its forces from the proximity of the Islamic Republic of Iran within 30 days after the final deal.
🔹Paragraph 5
Upon the signing of this M.O.U., the Islamic Republic of Iran will make arrangements using its best efforts for the safe passage of commercial vessels with no charge for 60 days only from the Persian Gulf to the Sea of Oman, and vice versa. The traffic of commercial vessels will immediately start, and considering the need for removing the technical and military obstacles and demining by the Islamic Republic of Iran, will be instated within 30 days. The Islamic Republic of Iran will conduct dialogue with the Sultanate of Oman to define the future administration and maritime services in the Strait of Hormuz, in discussion with other Persian Gulf littoral states in line with the applicable international law and the sovereign rights of coastal states of the Strait of Hormuz.
🔹Paragraph 6
The United States of America undertakes with regional partners to develop a definitive, mutually agreed plan with at least U.S.D. 300 billion for the reconstruction and economic development of the Islamic Republic of Iran. The mechanism for the implementation of this plan will be finalized as part of a final deal within 60 days. All required licenses, waivers and permissions needed for the relevant financial transactions will be granted by the United States of America.
🔹Paragraph 7
The United States of America undertakes to terminate all types of sanctions against the Islamic Republic of Iran, including the United Nations Security Council resolutions, I.A.E.A. Board of Governors resolutions, and all unilateral U.S. sanctions, primary and secondary, in an agreed-upon schedule as part of the final deal. The Islamic Republic of Iran and the United States of America acknowledge the critical importance of the sanctions termination issue above mentioned, and express their intentions to immediately address these issues in the negotiations in order to achieve mutual agreement on them.
🔹Paragraph 8
The Islamic Republic of Iran reaffirms that it shall not procure or develop nuclear weapons. The United States of America and the Islamic Republic of Iran have agreed to resolve the disposition of stockpiled, enriched material pursuant to a mechanism that will be mutually agreed upon in accordance with the schedule mentioned in Paragraph 7, with the minimum methodology to be down-blending on site under the supervision of the I.A.E.A. The two parties also agreed to discuss the issue of enrichment and other mutually agreed matters related to the Islamic Republic of Iran’s nuclear needs, based on the statutory framework being agreed upon in the final deal. The final deal will confirm the provisions of this paragraph. The United States of America and the Islamic Republic of Iran acknowledge the critical importance of the nuclear issues above mentioned, and express their intention to immediately address these issues in the negotiation in order to achieve mutual agreement on them.
🔹Paragraph 9
Pending the final deal, the United States of America and the Islamic Republic of Iran agree to maintain the status quo. The Islamic Republic of Iran will maintain the current status quo of its nuclear program, and the United States of America will not impose any new sanctions, and will not deploy additional forces in the region.
🔹Paragraph 10
The United States of America undertakes that immediately upon the signing of this M.O.U., and until the termination of sanctions, U.S. Department of Treasury will issue waivers for the export of Iranian crude oil, petroleum products and derivatives, and all associated services, including banking transactions, insurances, transportation, etc.
🔹Paragraph 11
The United States of America undertakes to make fully available for use the frozen or restricted funds and assets of the Islamic Republic of Iran upon the implementation of this M.O.U. The United States of America and the Islamic Republic of Iran will mutually agree on the procedures related to the release of these funds during the negotiations. Such funds, whether retained in the original account or transferred, shall be made fully usable for payment to any ultimate beneficiary designated by the Central Bank of the Islamic Republic of Iran. The United States of America undertakes to issue all necessary licenses and authorizations accordingly.
🔹Paragraph 12
The United States of America and Islamic Republic of Iran agree that an executive mechanism will be established to monitor the successful implementation of this M.O.U. and the future compliance of the final deal.
🔹Paragraph 13
After signing this M.O.U. and subject to the beginning of the implementation of Paragraphs 1, 4, 5, 10 and 11 of this M.O.U., and the continuing implementation of these measures, the United States of America and the Islamic Republic of Iran will start negotiations regarding the final deal exclusively on the other paragraphs.
🔹Paragraph 14
The final deal will be endorsed by a binding U.N.S.C. resolution.
I love the way Ben-Gvir states that we are an independent state and we’re going to go our own way.
Sounds like a plan. Start paying your own way then.
Just maybe his world is starting crumble. We can hope.
mgr: We can hope.
You can hope. But Israel has a friend that’s the most populous country in the world and that’ll be an increasing factor in the coming years–
What Brings Netanyahu and Modi Together: the making of an unlikely alliance
As Israel’s isolation deepens, ties with New Delhi are growing
https://archive.ph/A3ToL
https://www.ft.com/content/5829cf25-42c0-4aa4-84d7-9142ab66d6d4
Re: Lebanon (via Fars Telegram)
[Foreign ministry spokesman] Baqaei: If the Zionist regime’s aggression in Lebanon continues, it will be considered a violation of America’s commitments.
🔹We do not separate America and the Zionist regime, but their differences in methods and approaches are clearly evident.
🔹It is America’s responsibility to force the Zionist regime to respect America’s commitments to Iran in this document.
—–
With the dual tools of 1. Simply closing Hormuz again or 2. Taking kinetic action to encourage Israel’s exit
That said, I expect Trump to wriggle and deny it means Israel withdrawal. Fortunately, Iran holds all the cards.
so this is the mou that trump agreed to, and is now pretending/insisting was what we were after all along, or something?
talk about a headfake,lol.
this appears to be what Iran was after all along, but with added benefits for them.
i will be interested to see how trump tries to spin this as a great victory.
his utterances so far, seems he’s appealing to Rationalism…which is just weird, all by itself.
havent had time to go lurk in righty comments sections or righty twitx.
…and theres been no political talk to eavesdrop on at the feed store.
havent been anywhere else in town in a while.
local faceborg is silent on this, too…obsessed with the murder/suicide that happened here(!!) this last sunday.(this kind of thing is super-duper rare out here)
Plenty of other countries are going to be looking at this paragraph:
Admittedly, as we have discussed here many times, Iran is in an excellent position with regard to having a big population, highly educated (particularly after the fall of the shah), a unique geography (mountains), and a unique geographic position, dominating a narrow and shallow strait.
Yet other countries are likely to note the hollowness, capriciousness, and captiousness of the sanctions regime. Have the U S of A and mega-poodles of the E3 lost another wonderweapon?
On the other hand, many smaller countries that the U S of A likes to push around don’t have as many options. Cuba can’t bomb Israel. But Iraq can.
I imagine a lot of countries are looking at Iran’s impregnable non-nuclear arsenal and taking notes too.
DJG: On the other hand, many smaller countries that the U S of A likes to push around don’t have as many options.
After Tehran, real men go to Havana?
WRT the symbolism of Versailles, I was thinking about the other one, in 1871, which might be a more apt comparison in a way…although I guess Iranians weren’t there formally inaugurating a new great power a few weeks before.
At least Trump got to sign his surrender document in a palace instead of a railway carriage-
https://en.wikipedia.org/wiki/Compi%C3%A8gne_Wagon
The fact that Vance is the point man for this MOU, and Rubio is far into the background, makes me pessimistic.
I’ll never forget how Biden threw Kamala under the bus making her responsible for, among other things, the southern border.
Giving the VP anything seems like a poison pill in the American system.
A stupid question, probably: what are the agencies in Ben Gvir’s portfolio? How much “paramilitary assets” does Israel have? (I’m guessing his portfolio includes various “security forces” and “police” other than IDF, but what and how much of these does Israel have and how much “control” does he actually have over these?)
Israeli’s defiance of the MOU requirement for it to leave Lebanon recalls its attempts to retain Sinai after occupying it in the 1956 Suez Crisis. Eisenhower forced Israel to leave Sinai through a combination of economic and diplomatic pressure. Economic pressure included threats to cut off all economic assistance including tax deductible donations, bond purchases and military assistance. Ike bypassed the UN Security Council with veto equipped Britain and France by obtaining a Geneal Assembly resolution calling for withdrawal. Recommended is You Tube video “What Eisenhower Did When Israel Refused to Give Back Land After Winning War” by Best WW2 Archives youtube.com/watch?v=GQIHmQ7bAQk
It will be interesting to see what effect this climbdown will have on diehard MAGA followers. Is the Market really God for the fans of the likes of Fox audiences? Can even the most slavish lib-haters overlook the clanging cognitive dissonance and denial in Trump’s blase dismissal of his abandonment of the absolutism he was spouting as vindications for his war?
It’s the end of the U.S. hegemon as we know it, and I feel fine.
You got me singing along smiling H
Ditto!
Sleboda argues that Iran is pissing away its leverage and that US has skillfully salamisliced this leverage.
https://marksleboda.substack.com/p/mou-irans-victory-and-mistake-doa
Paragraph 10 waiving sanctions makes Paragraph 7 ending sanctions more of a formality — immediate relief for Iran… With that, it seems the Iranians are willing to wait on the frozen assets or the reconstruction funds until after the nuclear issue is settled — and if never settled, they collect some serious cash along the way — the longer the negotiations, the more the cash.. highly levered arrangement for them.
Contrary to some pre-disclosure chatter, the frozen assets are clearly not required to be released immediately, but are only going to be released by the US based on the tenor of the 60-day negotiations… though they may have some verbal agreements that are off the books….
Due Dissidence guys recapping the US Zio media meltdown over signing the deal. Guys have fun with the Zio meltdown. / ;)
Israel-First Media MELTS DOWN Over Iran Deal
https://www.youtube.com/watch?v=1yUBsm9GNbo
“then the draws don’t stop, the SPR keeps bleeding, and the price does the rationing that inventory couldn’t”
Common Sense Investing
@investinguab
What’s Next for Oil
There is no manipulation. There is, instead, strong optimism that a US–Iran deal to reopen Hormuz, a relief rally, and a 17-million-barrel crude draw the optimists are choosing to look straight past. The first two pieces argued oil had to run. This one is about what happens next, and the four questions that decide everything.
I. Start with the number nobody wants to sit with
Before any narrative, look at the actual balance sheet. This is the EIA’s Table 1 for the week ending June 12, 2026. The print that landed the same week the market decided the worst was over.
Fig. 1 — U.S. Petroleum Balance Sheet, week ending 6/12/2026. Source: EIA Weekly Petroleum Status Report, Table 1. Read the year-ago column.
Total crude stocks fell 17.2 million barrels in a single week — commercial crude down 8.3 to 418.2, the SPR down another 8.9 to 340.3. That is among the largest weekly crude draws on record. But the column that should stop you cold is the one on the right: against a year ago, total crude is down roughly 65 million barrels, and the SPR alone is down 62. We have been quietly draining the national tank to keep the commercial number from looking worse than it does.
And yet crude sold off into that print. That is the tell this piece is about. When a near-record draw meets a falling price, the market is not reading the inventory data; it is reading a story. The story arrived right on cue: a US–Iran agreement to reopen the Strait of Hormuz, oil dropping to a two-month low, and a relief rally in risk. The thesis writes itself — flows normalize by the fall, inflation was transitory, the worst is behind us.
II. The consensus thesis, stated fairly
Steel-man the trade you’re skeptical of. The EIA’s own June outlook lays it out: with Hormuz assumed shut in the near term, falling inventories keep Brent near $105 in June and July. However, once flows resume and shut-in production returns, the agency expects prices to fall toward an average near $79 in 2027. The EIA believes refining margins normalize. Product builds (gasoline and distillate both rose this week) provide a buffer. The stranded ships sail, the barrels in transit arrive, and the draws stop.
That is a coherent, defensible base case. It is also a model. And every model of this kind shares one quiet assumption: that all of the parties involved will behave normally. Reopen the strait and everyone resumes the prior choreography — producers pump, refiners run, insurers underwrite, tankers transit, consumers consume — as if nothing happened. The models assume the system snaps back to its mean because that is what systems usually do.
III. 1973 was a three-week war and the damage came after
There is a reason I keep coming back to 1973–74. The Yom Kippur War itself lasted about three weeks. The embargo that followed was the headline. But the lasting damage to the oil market and to inflation didn’t come from the shooting or even the embargo announcement. Instead, it came from how many parties were entangled, and how long it took all of them to stand down and resynchronize. The price didn’t settle when the war ended. It settled when the last party decided to act normally again, which took the better part of a year and reset inflation expectations along the way.
The parallel that matters today is not the size of the conflict. It is the number of independent hands on the valve. Catalogue the parties tangled up in the current Iran conflict and the resumption of flows and you get a long list. Iran, the regional Gulf producers whose shipping lanes run through the same chokepoint, the U.S. and its naval posture, the European and Asian refiners scrambling to replace Hormuz volumes, the insurers and reinsurers repricing war risk on every hull, the tanker owners deciding whether the transit is worth it, and China sitting on the demand side as the swing consumer. In 1973, a short war did long damage because too many parties had to agree to calm down at once. Today the cast is at least as large. A slight pinprick: one incident, one insurance repricing, one producer who decides the math no longer works — is enough to tip a market this tightly drawn.
IV. Three scenarios, one inventory clock
Scenario A: flows return to 100%
This is the consensus case, modeled realistically. The stuck ships leave, draws taper for a few weeks as barrels-in-transit arrive, and then modest, sustained builds take over, not a rocket. Commercial crude troughs around 407, claws back across the 400 line, and finishes the year comfortably but unspectacularly in the low-to-mid 410s. That’s what “the worst is behind us” actually looks like: a normalization, not a glut.
Scenario B: flows only half-normalize
The middle ground, and the honest base case. The ships leave and draws halve, but they don’t stop, because not every party comes back at once. Refiners run cautiously, insurance stays expensive, and the SPR keeps quietly bleeding to cover the gap. Commercial crude slides into the yellow zone and finishes the year in the high 360s, with the SPR drained another ~80 million barrels to get there.
Scenario C: nothing changes
The world where the parties can’t get along and draws persist at the current pace. The math gets ugly fast: commercial crude punches through 373, through 325, and ends the year near 300, while the SPR grinds toward an operational floor. Not a forecast. Just what the arithmetic does if this week’s draw is the run-rate rather than the peak. The point is to show how little has to go wrong.
V. Mid-July is where the rubber meets the road
Here is what I actually expect, and it’s closer to the optimists than you might think, for a few weeks anyways. The ships that are stuck will leave. Over the next several weeks to a couple of months, flows should normalize a little. Draws should drop a bit. We may even get a build or two as the in-transit barrels finally land and clear customs. That’s real, and the bulls will take a victory lap on it.
But a build driven by ships exiting a queue is a one-time event, not a trend. Sometime around mid-July is where the rubber meets the road. By then the easy barrels have arrived, and the question stops being “did the backlog clear?” and becomes “do builds continue?” That’s the moment that separates Scenario A from B and C, and it comes down to four questions: the four parties from Section III, restated as things that either happen or don’t.
Check all four boxes and you get Scenario A: builds continue, commercial crude climbs back above 400, and the price of oil drifts toward the EIA’s $79 world. Check two or three and you get Scenario B — a grudging, half-normalized tightening with the SPR paying the difference. Check none and you get Scenario C, where the only thing that resolves the inventory math is a price high enough to ration the barrels. The scenarios are the price forecast. I’m not handing you a number; I’m handing you the boxes and telling you to watch them get checked, or not, in real time.
VI. The tape’s quiet dissent
Now the part I had to correct from my own first draft, because the data deserves more than a silly slogan. The week of June 8–12 was a relief rally: the US–Iran Hormuz deal hit, oil fell to a two-month low, and the all-clear trade fired. In that world the textbook says inflation hedges should get sold and bonds should get bought. Both happened — but look at the magnitudes, because the magnitudes are the message.
Gold did not behave like a hedge being discarded into good news. It rose about 2% on the week, climbing for three straight sessions to an intraday high near $4,377 even as the supposed inflation scare was being defused. Long bonds (TLT) did catch a bid , and crucially TLT did not outpace gold. If the market truly believed the inflation risk was gone, you’d expect the opposite: the inflation hedge dumped hard, the long bond ripping. Instead the hedge outran the bond. That’s not an all-clear. That’s a market buying protection on the very week it was told it no longer needed any.
And the 10-year tells the same story even more plainly. Here is the yield, year-to-date, as of the close:
Fig. 6 — 10-year U.S. Treasury yield, YTD: 4.487%, +0.059 on the session, sitting near its highs for the year. Source: user-supplied broker chart (10-yr yield, 5:05 PM EDT). Cross-reference: CNBC TLT / Treasury yields coverage.
Run the thought experiment. If the world genuinely believed the oil-spike risk was over and inflation was safely transitory, the long end would rally hard and the 10-year would fall. It would not sit at 4.49%, up on the session, pinned near its highs for the entire year. Yes, yields eased intraday on the Iran headline. But “eased a few basis points off the top while still near 4.5%” is not the bond market sounding the all-clear; it’s the bond market refusing to fully exhale. A real all-clear looks like a yield breaking down through its range. This one didn’t.
So the corrected read is sharper than my slogan, not softer: on a pure relief-rally week, gold outpaced bonds, and the 10-year stayed elevated. Two of the deepest, least sentimental markets on earth were handed the perfect excuse to price the all-clear and they declined. The inflation hedge kept bidding. The long end wouldn’t break. That is the tape telling you it isn’t convinced the risk is gone.
Gold outran the bond on a relief-rally week, and the 10-year wouldn’t break. Hold your popcorn — this is just starting.
VII. So where does this leave the barrel?
Exactly where the relay left it. The first piece argued the gold/oil ratio handed the baton to oil. The second argued the supply shock had a player nobody scouted. This third piece is the simplest: there is no manipulation in a near-record draw meeting a falling price: there is only a market that has pre-committed to optimism, and an inventory clock that doesn’t care how anyone feels.
What I expect over the next few weeks is the optimists’ victory lap: ships leave, draws ease, maybe a build or two. Enjoy it; it’s real. But mid-July is the test. If the four boxes get checked, Scenario A is your world (a normalized low-410s, not a glut) the worst really is behind us. If they don’t, if the parties can’t synchronize, if the refineries don’t come back poof, if insurance stays a tax on every barrel, if “transitory” turns out to be the year’s most expensive word: then the draws don’t stop, the SPR keeps bleeding, and the price does the rationing that inventory couldn’t.
And the two markets with the least incentive to flatter the optimists — gold and the long bond — have already filed their dissent. Handed a perfect relief-rally week, gold outran the bond and the 10-year wouldn’t break. They are not pricing the all-clear. Hold your popcorn. This is just starting.
Watch the boxes. Watch mid-July. And watch whether gold keeps outrunning the bond while the 10-year refuses to break — the tape will tell you which scenario you’re living in before the headlines do.
Disclosure & Disclaimer
This is the third piece in a series. Full position disclosure from the prior letters still applies; the author is positioned long the oil complex via BNO and related names and has previously traded the gold and silver complex. The three inventory scenarios are the author’s own forward extrapolations of EIA weekly data, built from the Table 1 print shown above (week ending 6/12/2026) and recent draw rates; they are illustrative behavioral cases, not predictions, and the exact paths depend on assumptions stated in the text. The week-of-6/8 asset chart is indexed to Monday and approximates the actual moves (gold roughly +2% on the week and outpacing a modestly higher TLT) to illustrate the relative signal, not exact returns; verify against your own data. The 10-year yield image is the user-supplied broker chart (4.487%, +0.059, near YTD highs); directional context cross-referenced against CNBC and iShares/BlackRock TLT data for the week. Inventory thresholds (325 / 373 / 400) are the author’s own framing. Nothing here is investment advice — verify all figures against primary EIA and market sources before relying on them. Do your own work, size your own risk.