Wall street hopes for a truce

XTI/USD

Key zone: 96.00 - 98.00

Buy: 100.00 (on a strong negative fundamental backdrop); target 103.50-105.50; StopLoss 99.30

Sell: 96.00 (on a pullback following a retest of 97.50); target 93.50-91.50; StopLoss 96.70

Oil and interest rates continue to rise. Big capital is waiting for Trump to soften his policy, while the U.S. House of Representatives has already voted three times to end U.S. involvement in the Middle East conflict.

In the spring, investors bought stocks after declines, expecting that a sharp rise in oil prices and falling equities could prompt Trump to abandon new strikes on Tehran or resume ceasefire negotiations. Now confidence in such a scenario is weakening.

A reminder:

On Wall Street, this scenario is called TACO — Trump Always Chickens Out, or “Trump always backs down.” It is based on the idea that the president is more sensitive than his predecessors to declines in financial markets, especially if they could reduce Republicans’ chances of retaining control of Congress in the midterm elections. Unfortunately, this plan has no chance now.

The current situation differs from the spring scenario because U.S. stocks remain resilient. Following Wednesday’s decline due to the Fed’s decision, the Dow Jones Industrial Average has lost 2.6% over the month. The S&P 500 and Nasdaq Composite have declined by only 0.6% and 0.1%, respectively.

• The continuation of the conflict creates risks for markets and American consumers. The average gasoline price in the U.S. has reached $4.40 per gallon. Expensive fuel could complicate the Republicans’ position in the midterm elections: voters often associate rising prices and household expenses with the policies of the party in power.
• Oil fell yesterday following reports that Saudi Arabia intends to restore about half of the throughput capacity.
• An agreement with Iran could ease U.S. inflation, but tensions between Saudi Arabia and the Iran-backed Houthis in Yemen are intensifying. Alternative oil supply channels, such as the Trans-Saudi oil pipeline, are once again under threat, so the risk of another surge higher cannot be ruled out.

But there is a more global problem.

However, Trump may soon lose his main trump card in his Middle East game — oil from the U.S. Strategic Petroleum Reserve. At the end of 2025, the SPR still held around 413 million barrels. Now it has about 285 million, or 40% less.

Of course, the U.S. will not run out of oil over the medium term. America itself produces enormous volumes, actively imports oil, and maintains commercial inventories. But the safety cushion Washington is trying to use to protect itself from oil-related problems is getting thinner and thinner.

Right now, Trump desperately needs at least someone, somewhere, to start negotiating — Iran with Israel, Ukraine with Russia, the Houthis with the Saudis, etc. Because having expensive oil, several wars, and a shrinking strategic reserve at the same time is a very dangerous strategy for Donny. Especially when the American voter pulls into a gas station and quickly turns into a very unhappy consumer.

And What Is the Result?

An increasingly persistent thought arises about switching from long to short positions in the main benchmarks. Physical oil remains expensive, supplies are tight, inventories are shrinking, and real agreements are still a very long way off.

Otherwise, it may already be too late: when politicians finally “make peace,” sign the papers, and pose for a group photo for the press, it will already be too late to enter a short. The exact date when previous stages of de-escalation began can only be known after closed-door discussions. And the market does not wait for a peace agreement to be signed. It usually starts trading the future much earlier.

A gap is very possible at the weekly open — for now, we recommend not trying to be heroes, but reversal scenarios should be considered. And StopLoss levels on open positions are better moved closer to the price.

So we act wisely and avoid unnecessary risks.

Profits to y’all!