Iran War | Political & Economic Impacts

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lawtig02 said:
Continued Dalio post --

2. If, on the other hand, the Strait of Hormuz is left in the hands of the Iranians to use as a weapon to threaten American allies in the Gulf and the world economy more broadly, everyone will be hostage to the Iranians, and Donald Trump will be perceived to have picked a fight and lost. He will have left U.S. allies in the region with a huge problem, and he will lose credibility, especially given what he has said. For example, Trump has said: “If for any reason mines were placed, and they are not removed forthwith, the military consequences to Iran will be at a level never seen before,” “we will take out easily destroyable targets that will make it virtually impossible for Iran to ever be built back, as a nation, again — Death, Fire, and Fury will reign upon them,” “the new leader in Iran will have to obtain our approval; otherwise, he will not last long.” I often hear senior policymakers in other countries say in private things like, “He talks a good game, but can he fight and win when the going gets tough?” Some observers are anticipating this fight like the Romans in the Colosseum or sports fans awaiting the final and greatest contests. President Trump is now calling on other countries to join the U.S. in ensuring the free passage through the Strait; his ability to get them to do so will be indicative of his ability to form alliances and muster power, so that would be a big win.

It will be very difficult for the United States and Israel alone to ensure the safe passage of ships without prying Hormuz loose from Iranian control, and it will likely require a great battle to do so. The outcome is existential for the Iranian leaders and the largest and most powerful segment of Iran’s population. To the Iranians, this war is very much about revenge and commitment to what matters more than life. They are willing to die as a demonstrated willingness to die is essential for one's self-respect and showing the devotion that brings about the greatest reward—while Americans are worrying about high gas prices and America’s leaders are worrying about midterm elections. * In war, one’s ability to withstand pain is even more important than one’s ability to inflict pain. The Iranians' plan is to try to drag the war out and steadily intensify it because it is widely known that the American public, and therefore American leaders, have very limited capacities for pain and wars that drag on. So, if this war is made painful enough and long enough, the Americans will abandon the fight and their Gulf "allies," and other "allies" around the world, will see that the United States will not be there to protect them. This will undermine the relationships with aligned countries in analogous situations.

3. While there is talk of ending this war with an agreement, everyone knows that no agreement will resolve this war because agreements are worthless. Whatever happens next—i.e., leaving Hormuz in Iranian hands or taking control away from them—is likely to be the worst phase of the conflict. This "final battle," which will make crystal clear which side won and which side lost control, is likely to be a very big one.

To quote Iran's military command, “All oil, economic, and energy facilities belonging to oil companies in the region that are partly owned by the United States or that cooperate with the United States will be immediately destroyed and reduced to ashes.” That will be what they attempt. If the Trump Administration is successful in its efforts to get other countries to join it in sending warships to provide safe escorts—and hasn’t already been mined—we will see if that becomes a solution. Both sides know that the final battle, which will make clear which side won and which side lost, still lies ahead. And they know that if President Trump and the United States don’t deliver on reopening the strait, it will be terrible for them. If, on the other hand, President Trump wins this final battle and eliminates the Iranian threat for at least the next several years, it will greatly impress everyone, empower President Trump, and demonstrate American power.

4. The direct and indirect effects of this “final battle” will ripple around the world, affecting trade flows, capital flows, and geopolitical developments with China, Russia, North Korea, Cuba, Ukraine, Europe, India, Japan, etc. The current war, along with other recent wars, is part of the far bigger classic Big Cycle progression that has financial, political, and technological implications. These implications can be best understood by studying past analogous wars and applying the lessons learned to current circumstances. For example, a country’s financial and military capacities to fight wars are affected by the number and severity of the wars it is fighting, its internal politics, and its relationships with countries that have shared interests (e.g., between Iran, Russia, China, and North Korea). The United States doesn't have the capacity to fight multiple wars (no country does), and in a world that is so interconnected, wars, like pandemics, spread quickly in unimaginable ways. At the same time, within countries, especially within democracies that have great wealth and values differences, there is always fighting over what should be done and who should pay how much and in what form (i.e., money, lives lost, etc.). There will almost certainly be these sorts of direct and indirect relationships and consequences that are very difficult to anticipate but won't be good.
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TLDR: It didn't have to be this way.
 
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superrific said:
Ray Dalio basically runs a cult inside a hedge fund. Hence all the simplified and apocalyptic language.

In my view, that's a lot of uninformed babbling. When people like Dalio start talking about the sweep of history, start analogizing to events from centuries ago -- that's how you know they are full of shit. Andreesen and Thiel do this too. It's attractive because it can't be countered within the parameters of the discourse. It's easy to write, "great empires fail when they lose a final battle," and hard to debunk because of the vagueness. Which empires? Which battles? What about the final battles that end in losses? So on and so forth. On twitter, this sort of shit flies because even the longest responses are tiny compared to our actual understanding of historical events.

For instance:

1. He evidently never understood the Suez crisis, or forgot what he knew. That situation was not comparable to today's situation. The British didn't lose because "everyone watches and shifts their approaches to these countries and where their money goes based on what happens. This decisive "final battle" that determines the winners and the losers and whether the empire survives or falls reshapes history because people and financial flows quickly and naturally run from the losers."

The UK lost because Eisenhower did not support the UK and the UK thought he would. Full stop. When we go further back to the 17th century in Spain, I mean, come on dude.

2. I don't know what he means by "great battle" but I'm pretty sure there is not going to be any battle that escapes "trivial" status. What is happening is important, but there is no "great battle." By the way, Iran can't control the strait indefinitely and it doesn't want to and I have no idea why this kooky old man thinks they can or will.

3. Agreements are worthless is a bizarre take given that almost all wars are ultimately resolved by agreements of some kind. It's true that agreements are worthless for Trump, but even he may be forced into acquiescence.

4. The idea that somehow Reagan reversed US capital flows by getting the hostages released is bonkers.
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1000%

As soon as I see a phrase like "...and triangulating my thinking with smart, well-informed leaders and experts has always helped me make better decisions", I know I'm reading the ramblings of a rich pretentious ketmine fueled bullshit artist. Didn't Musk use the EXACT SAME TURN OF PHRASE a week or so ago?

Yeah, the "experts" he's "triangulating" with are all his tech bro Mountainhead cronies and Joe Rogan style light weights. It easy after the fact to say "Wow, after attacking Iran, we sure are fucked!" (and I don't disagree with that part).

But maybe... just maybe... and hear me out here... the experts we should be "triangulating" with are the career officers at the Department of State, and Department of Defense who universilly have advised every presidential adminstation since Carter that attacking Iran would fuck us.

Show me the part where this smart well informed guy who I should listen to was saying that from the get go. You can't becuse it doesn't exist. I haven't checked, I don't have to check, I know the type. I am 1000% correct in saying a statement like that does not exist. I honestly don't know Ray Dailo from Adam's housecat, but damned if I can't smell one of these pseudo intellectual bullshit artists from a mile away. The type is easy to spot.
 
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BillOfRights said:
Can someone please explain this?
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I put the two screenshots of the charts in https://claude.ai/ without the tweeter's commentary and got back this:

These two Bloomberg charts tell an interesting and somewhat contradictory story about the current macro environment. Let me break down what each shows and then synthesize the implications.

Chart 1: Fed Funds Futures (CME FedWatch-style)​

The market is pricing in a very modest hiking cycle followed by cuts:
  • The Fed is currently at 3.75% target / 3.64% effective rate
  • Futures imply a peak around 3.76% near October 2026 — only about ~11-12bps of additional tightening priced in
  • After that peak, the market expects aggressive cuts beginning mid-2027, with the implied rate falling toward ~3.1% by late 2027
  • The bar chart turning sharply negative after June 2027 suggests markets expect something forces the Fed's hand — likely a growth scare or recession
Key takeaway: Markets don't believe the Fed needs to tighten much more, but they also expect the economy to weaken enough to require significant easing within 18 months.

Chart 2: USGGBE01 — 1-Year Breakeven Inflation Rate​

This is arguably the more alarming chart. The 1-year breakeven inflation rate surged dramatically today (03/20/2026):
  • Opened around 5.18, dipped to 5.11 early morning
  • Then exploded higher to 5.32-5.33 — a massive intraday move of ~16-17bps
  • This is well above the Fed's 2% target, suggesting bond markets expect inflation to run extremely hot over the next 12 months

​

The Tension Between These Two Charts​

This is where it gets really interesting — and concerning:
Implication
Fed FuturesModest hikes, then cuts — relatively benign Fed path
1Y BreakevenInflation surging to ~5.3% — deeply problematic
These two data points are in significant conflict. If 1-year inflation expectations are genuinely at 5.3%, the Fed cutting rates aggressively by late 2027 would be extremely premature and potentially reckless. A few possible interpretations:
  1. Tariff shock being priced in — The most likely explanation today. A large tariff announcement or escalation could cause a one-time price level jump that markets expect to be transitory, allowing the Fed to eventually cut despite near-term inflation
  2. Stagflation fears — The market may be pricing in a scenario where growth slows (hence future cuts) but inflation remains sticky due to supply-side shocks — the worst of both worlds
  3. Fed credibility being tested — If breakevens keep rising while the Fed holds or cuts, real rates fall and inflation psychology could become unanchored

Market Implications​

  • Bonds: Extremely difficult environment — inflation erodes real returns, but growth fears cap how high nominal yields can go
  • Equities: Stagflation is historically very bad for equities, particularly growth/long-duration stocks
  • Gold/commodities: Likely beneficiaries as inflation hedges
  • USD: Mixed — inflation supports higher rates (bullish USD) but growth fears and eventual cuts are bearish
  • Consumer: A 5%+ near-term inflation print would be a serious squeeze on real purchasing power, particularly for lower-income households
The sharp intraday move in breakevens today specifically suggests a catalyst occurred during the trading session — likely a Fed statement, economic data release, or policy announcement — that caused a rapid repricing of inflation expectations. That kind of violent intraday move warrants close attention.
 
^ it is interesting that it guess Tariff shock was mostly likely explanation. Even AI couldn't dream up the sh!tstorm Trump created.
 
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