Trump's Reality Collides with Real Reality

The rule of thumb for announcements by cult leader, convicted felon, and failed President Donald Trump during the United States-Israel war against Iran has been that when the financial and oil markets are closed, Trump talks tough. When the markets are open, Trump is conciliatory. You don't have to be particularly cynical to guess that he is trying to keep oil prices down and the stock market up. Amazingly, he has been having significant success with this strategy. However, there are indications today that investors have finally caught on and are no longer paying Trump's remarks as much attention.

Trump believes that reality is whatever he says that it is. He is surrounded by courtiers who will do everything they can to ensure that reality conforms to Trump's wishes. As we have seen, if a hurricane is not headed to where Trump claims that it will go, it takes nothing more than some marks with a Sharpie to alter a map of the hurricane's path. It is Trump, not the facts, that decides what is true. In the Iran war, however, Trump is encountering a situation that is not bending to his will. Trump believed that the decapitation of the Iranian regime on the first day of the war would result in a Venezuelan-style capitulation. It did not. Trump assumed that the war would end so quickly that the Strait of Hormuz would not be closed. In fact, the strait was and remains closed. Trump once said that the war would be over in less than four weeks. We are now in the 10th week. Trump has repeatedly claimed that the Iranians are desperate to negotiate an agreement to end the war, only to have Iranians skip expected negotiations. Far from Trump controlling reality, his words have repeatedly been shown to be empty. German Chancellor Friedrich Merz went so far as to say that "An entire nation is being humiliated by the Iranian leadership".

Nowhere has the gulf between Trump's words and reality been wider than when it comes to oil and gas prices. The situation worldwide is dire. Americans have it better than most, but things are still bad. As NBC News reported this morning, relying on AAA data, a gallon of regular gas now averages $4.46. This is up by $1.48 since the beginning of the war. Premium gas is now averaging $5.31 a gallon, up $1.45. Diesel is averaging $5.64 a gallon, which is up $1.88. According to Patrick De Haan, the Head of Petroleum Analysis at GasBuddy, "Since March 1, Americans have spent $21.7 billion more on filling their tanks with gasoline." Yet, as recently as this morning, Treasury Secretary Scott Bessent described the price increase as a "short-term blip up" and said that he is "confident on the other side of this that prices are going to come down very quickly". This is delusional thinking.

Jet fuel is currently $4.13 a gallon and had been selling for $2.50 prior to the war. When Spirit Airlines shut down this weekend, a company statement blamed "the recent material increase in oil prices". Nevertheless, Trump officials attributed the failure to former President Joe Biden and other Democrats for the airline's collapse.

Trump has always attempted to portray the increased fuel prices as a temporary blip. He has even gone so far as to say that prices are not very high. In mid-March, Energy Secretary Chris Wright told CNN that "there's a very good chance" that gasoline would be below $3 a gallon by the summer. A month later, Wright was describing that as "an aggressive timeframe". Trump is increasingly bristling at the mention of gas prices. When a reporter asked how much longer Americans would see the current high gas prices, Trump responded by saying, "You're such a disgrace."

Trump's position regarding gas prices is that the American people should be (and, according to Trump, are) willing to accept higher prices at the pump in exchange for Trump preventing Iran from obtaining a nuclear weapon. There are a number of problems with this contention. First of all, the American public was never consulted over whether it was actually willing to make this sacrifice. Moreover, former President Barack Obama had successfully negotiated an agreement with Iran that would prevent the country from developing nuclear weapons. Trump tore that agreement up. Then, last summer, Trump asserted that American bombing raids had "obliterated" Iran's nuclear development facilities. In fact, Iran has repeatedly shown that it is willing to negotiate an end to its nuclear weapons program, so that would be a relatively easy objective to obtain. It would not have required a war. Trump, however, is making demands beyond simply ending the nuclear weapons program that the Iranians consider onerous.

Just over a week ago, much was being made about expected negotiations between the U.S. and Iran in Pakistan. Despite repeated claims from the U.S. that such talks were imminent, and that Steve Witkoff and Jared Kushner were ready to depart for Islamabad at any time, the Iranians never committed to such talks. Indeed, Iranian Foreign Minister Abbas Araghchi made a brief stop in Pakistan but left before the talks had been tentatively scheduled. This led to Trump making an announcement that he had stopped the U.S. negotiating team from travelling to Pakistan. Again, Trump was trying to rewrite reality. Had Trump not stopped Witkoff and Kushner from travelling, they would have encountered nothing but an empty room.

Trump continues to claim that he holds "all the cards" when, in fact, it is obvious that the most important card is the closure of the Strait of Hormuz, a card that Iran holds. The Trump has become an emperor with no clothes has become increasingly obvious. In his recent remarks, Merz was quite frank, saying Trump had "quite obviously gone into this war in Iran without any strategy whatsoever". Merz also noted that "the Iranians are obviously stronger than previously thought, and the Americans clearly don't have a truly convincing strategy in the negotiations".

Over the past few days, Iran has provided the U.S. with a list of 14 points for an agreement. The list was pretty outlandish, requiring the U.S. to pay reparations and to remove all of its military forces from the region. This was not a list prepared by a country on the brink of surrender. Nevertheless, Trump "truthed" that he would be "reviewing the plan". Ominously, Trump added that the Iranians "have not yet paid a big enough price for what they have done to Humanity".

Yesterday evening, probably in preparation for the resumption of oil sales and the financial market openings this morning, Trump announced a new initiative. On Truth Social, Trump wrote that the U.S. would begin to "guide" ships trapped in the Gulf through the Strait of Hormuz. Since the strait was closed, hundreds of ships have been stuck in the Persian Gulf. In many cases, this is creating humanitarian problems as the ships' crews are stuck onboard and running low on food and water. As such, Trump portrayed this as a humanitarian effort.

The Iranians reacted very negatively with a senior Iranian official telling Drop Site News that Trump's move "is primarily intended to provoke Iran into taking an initial step toward confrontation, thereby creating a pretext for escalation and enabling him to justify further military action in response to an Iranian initiative". The report also said that "any commercial vessel attempting to transit through designated restricted routes without prior coordination will be promptly intercepted by Iranian forces."

This morning, there have been a number of contradictory claims made by the U.S. and Iran about developments in the region. The U.S. Central Command announced that two U.S.-flagged merchant vessels had successfully transited the strait. Iranian sources, however, described that account as “baseless" and consisted of "outright lies". We will have to wait to hear from independent analysts, I guess.

Also this morning, a ship linked to South Korea was subject to an attack, most likely by an Iranian drone, while it was near the Strait of Hormuz. In what appears to be a second attack, the United Arab Emirates said that a tanker belonging to the Abu Dhabi state oil firm ADNOC was targeted by two Iranian drones while it was attempting to pass through the strait. In addition, the Iranian state broadcaster, IRIB, reported that the Iranian navy had fired warning shots near U.S. Navy destroyers that were operating near the strait.

Trump was likely hoping to calm markets with his announcement that the U.S. would guide ships through the strait based on the assumption that traffic would increase from the Gulf. However, developments have had the opposite effect. Trump has clearly raised the likelihood of renewed conflict with the possibility of further damage to Gulf oil facilities. As I write this, Brent crude is up almost 6% and West Texas Intermediate is up almost 4%. There were some signs that the stock market might have an up day, but currently all three major indices are in the red. The Dow Jones Industrial Average is down nearly 500 points. Neither oil nor financial markets appear to be reassured.

As I have repeatedly written, Trump can either make an agreement with Iran on terms that will be humiliating for him, or he can escalate the conflict. Trump appears to be slowly moving toward escalation, but in a way that will require Iran to fire the first shot. For its part, Iran doesn't appear to be backing down and is more than willing to fire the first shot. This is a losing situation for Trump. A return to fighting will necessarily keep the Strait of Hormuz closed and could result in further damage to the region's oil facilities. The global economy is already facing significant danger, and a continued oil shortage, let alone one that becomes even more acute, will likely push it over the edge. As for Americans, we could easily be looking at a $5 national average for regular gas, just as the summer driving season begins.

Trump frequently appears to be able to bend reality to his will. However, this has not been the case with the war against Iran. Trump repeatedly attempts to spin events in a positive manner, only to have his story undermined by the facts on the ground. Now, Trump is reviewing Iranian negotiating offers and has apparently provided a response. At the same time, he is escalating things militarily. Trump may view this as a carrot and a stick approach, but if the escalation gets out of control, the stick may turn out to be just as punishing to U.S. interests as Iranian ones.