No One Is Coming to Save the Economy
“The Iran war has caused the gravest energy shock of all time, the head of the International Energy Agency warned,” wrote the Financial Times today, adding that, “it could take six months or longer to fully restore oil and gas flows from the Gulf.” Many people give in to the fatalism behind the famed post of how we can’t wait to see how ‘ol Donny wriggles out of this one, and ah…well…nevertheless—but that isn’t totally accurate. Teflon Don has had some things stick. He was punished by the electorate for screwing up the COVID response in 2020, there was a fleeting moment after January 6th where elites broke up with him, and don’t forget about his six bankruptcies. Trump is not impervious to all consequences in a land specifically designed for elite impunity, just most, and Iran is determined to ensure that he pays for this mistake. Frankly, they’re doing a terrific job of it so far. They have already locked in plenty of inflationary dynamics in the early days of this war, and you and I are going to pay for it.
It’s quite possible that we could look back at this week as a watershed moment in global markets. The week that the world began to digest “the greatest global energy security threat in history” according to Fatih Birol at the IEA. To make matters worse, this week was interspersed with a very bad inflation print in the U.S. that had nothing to do with the oil shock from Trump and Israel’s war on Iran which began on February 28th.
“I don’t get any sense that inflation is decelerating,” said Mark Zandi, chief economist at Moody’s. “It feels like it’s uncomfortably and persistently high.” This was in response to Wednesday’s Producer Price Index (PPI) that rose 0.7% in February, hitting a 12-month PPI inflation rate of 3.4%, the highest in a year. This figure more than doubled analysts’ expectations, who anticipated a 0.3% month-over-month increase. Trump’s trade war has done exactly what everyone who ever accidentally stumbled into an Econ 101 class knew would happen, and it has embedded inflation within the economy. Right now, we’re largely seeing it show up on the producer side, but his complete and total annihilation of the farm economy is showing up in some consumer-side prices.
The cost of fresh vegetables is up a stunning FORTY EIGHT PERCENT from February 2025:
www.bls.gov/news.release…
— Anne Helen Petersen (@annehelen.bsky.social) March 18, 2026 at 2:03 PM
This PPI print put a damper on the previous week’s decent Consumer Price Index (CPI) print that some had hoped signaled that we are dodging the inflationary tariff bullet. Producers feel the impact of tariffs first because they’re the ones paying the taxes to import products they sell, and when they finally pass those costs to consumers, then it will show up in the CPI. So if we are seeing inflation in the PPI but not the CPI, that means we still have a ways to go for the inflationary dynamics that Trump unleashed in his trade war to hit your wallet.
Which means we have barely scratched the inflationary surface of the largest energy shock in history. Iran shutting down the Strait of Hormuz was largely considered unthinkable because of the massive damage it would do to Iran, China and Asia who imports most of Iran’s oil, as well as the global economy. All previous beliefs about tensions with Iran generally assumed that a resolution would be reached before Iran imposed this worst-case scenario, but worst-case scenario is Trump’s brand, and we are only in the third week of the market digesting the increasingly hellish reality that Trump has created.
Thinking about this again, how the wise, sage, cold eyed analysts at Goldman determined we should be back to about 50% of normal oil exports by now
— Sky Marchini (@sky.skymarchini.net) March 19, 2026 at 10:05 AM
Bond yields are telling a pretty bleak story right now (bonds are the cost of government borrowing, and therefore, your borrowing costs). The two-year Treasury yield, the most sensitive bond to Fed policy, is up nearly 5% on a relative basis this week. It is up 15% in the last three weeks. That means that traders are selling bonds and demanding higher interest rates to justify lending the U.S. government money, and the reason they are doing that is because they expect more inflation (another reason they could do this is they expect a lot more economic growth, but the last indicator I will get to casts doubt on that dubious logic).
The double-whammy of the bad PPI report and the massive oil spike is a sobering moment for markets, as the naive belief from last year that inflation is a thing of the past is now absofuckingloutely a thing of the past. You are a fundamentally unserious human being now if you are not worried about inflation with crude oil above $110 as I write this. As long as energy prices remain elevated, inflation becomes closer to a guarantee each day than the last. The largest liquid natural gas field in the world has already been taken partially offline, as Qatar lost 17% of their production for up to five years after Iran retaliated for an Israeli strike on their portion of this LNG field (to give you an idea of how bad this is, Trump posted “NO MORE ATTACKS WILL BE MADE BY ISRAEL pertaining to this extremely important and valuable South Pars Field”).
If the war ended right now, high energy prices are already baked into the economy for a minimum of at least six months according to the IEA, and the largest LNG producer in the world has seen their capacity degraded for probably the rest of this decade. You don’t have to be an economist to know the impact that lower supply has on prices when demand remains constant or even rises, you just have to have lived through the COVID supply shock and you’ll know more about economics than the doofuses in the Trump administration proved they do when they launched this war before they knew what the Strait of Hormuz was.
In a normal world, this is where the Federal Reserve would be called upon, as their job is to help manage and lead markets with their immense balance sheet and interest rate influence. But we don’t live in a normal world, we live in one where Trump has waged a war on the Fed’s hallowed independence in an unhinged bid to lower interest rates (if he did that at this point, it would almost certainly cause even more serious bouts of inflation like it did in the 1970s). The vast uncertainty of what the world’s most important financial institution will do in reaction to this mounting crisis is adding an additional risk premium to markets that are starting to see risks proliferate everywhere they look. In uncertain times, the Fed is typically a steady hand, but with Jerome Powell’s term ending in May (but not his term on the Fed governor’s board, which he has pledged to remain on as long as this sham investigation into him is open), there is an open question as to whether incoming Fed Chair Kevin Warsh will be able to do what Trump wants him to do, or even if Republican Senator Thom Tillis will even allow Warsh’s confirmation to go forward, which he has said he will block as long as the sham investigation into Powell is open. The Fed is actually one of the biggest sources of macro uncertainty right now.
But even if we were in a normal world where the Fed could be trusted to captain us through these rocky economic waters, Trump is creating a set of conditions no policymaker could ameliorate quickly. The entire point of why stagflation is so bad is that there really is no monetary policy tool you can use to fix part of it that won’t worsen another aspect of this conflicting dynamic. Cutting interest rates to try to lower borrowing costs and spur economic growth can raise inflation, then raising interest rates to tame inflation can crush growth and raise unemployment. It’s a damned if you do, damned if you don’t policy situation once thought to be impossible that Jerome Powell has been warning about at every FOMC meeting over the past year. Trump’s trade war had the effect of pouring gasoline on an inflationary fire that hadn’t quite fully died down from its peak around 9% in 2022, and stumbling ass backwards into close-to-worst-case scenario for global energy markets is like placing a thermonuclear weapon in the middle of that inflationary fire and hoping it doesn’t explode. Between oil, gold, bond yields and copper, there is a very bleak and crystal-clear story being told on the charts right now.
Theoretically, in an energy shock, gold should rise in value like it did in the 1970s. Government debt becomes less attractive in any crisis and in inflationary crises, interest rates rise which make debt payments more onerous which makes government debt even more unattractive. If you plot gold and oil on the same chart across the stagflationary 1970s, they basically rise in tandem with each other. That has not been the case this year, in part due to one of gold’s short-term quirks: it does well in low-interest rate environments and when the dollar is weak. High interest rates (theoretically) strengthen the dollar, and a strong dollar weakens assets. The reason why is simple math given that the dollar is the denominator we use to express asset values: if an asset in the numerator is worth 4 and the dollar is worth 1, that asset is worth 4 in dollar-denominated terms (4/1 = 4), but if the dollar rises to be worth 2 and the asset value remains unchanged, the asset is now worth 2 in dollar terms (4/2 =2).
A big part of gold’s massive rise earlier this year after Trump tried to take Greenland was that the market was still pricing in about three rate cuts in 2026, which made gold more attractive beyond its use as a debasement hedge against the collapse of trust in the United States. Gold has now erased its entire parabolic move after the Greenland crisis, reflecting how the low-interest rate environment traders expected later this year is gone, but it is still elevated above 2025 prices, demonstrating how the long-term debasement trend is still intact. The Fed did not cut rates at their meeting on Wednesday and the dot plot which reveals their future expectations for cuts poured cold water on the idea that we may even get one rate cut this year, and three is just not happening. Inflation is back on the menu, and you don’t cut interest rates when inflation is rising unless you’re a know-nothing idiot like Donald Trump.
Gold, oil, and bond yields are all telling the same inflationary story right now, but that’s not the only fear driving markets. Adding copper’s extreme recent fall alongside the rise in oil prices ties this picture up in a neat little stagflationary bow, as copper’s chart looks about identical to gold, but with a deeper pullback (it fell as much as 29% from its high at the end of January).
Inflation cuts into economic growth, but inflation also is growth (just not healthy economic growth), so if you expected the economy to keep growing, you would likely see copper rising this year like it did all last year as the economy grew even as inflationary dynamics took root. Every building in the world is filled with copper, as well as countless products that are intrinsic to the global economy, so it is used as a rough proxy for overall economic growth. If the price of copper is falling, that could be interpreted to mean that growth expectations are falling too because fewer businesses are buying copper to build new things. All while higher inflation expectations rattle every bond market around the world, raising borrowing costs for businesses who might otherwise be buying copper to build new things. We are not even one quarter into this copper pullback, so it’s too early to call it a trend, but that’s the big thing to keep an eye on now. The inflation fear is pretty well settled as long as oil is this high—it’s real and it gets realer each day—so stagflation has moved from a theoretical future problem under current trends to the next feared domino to fall should the inflation Trump has guaranteed us cut into economic growth.
This has been a sobering week for the economy. The PPI showed that inflation would have been a problem without this war in Iran, which has already significantly degraded the world’s LNG supply for the rest of this decade and unleashed all sorts of medium- and long-term inflationary dynamics around oil prices. We are currently living in the largest energy shock ever during a time where the concept of responsible leadership feels like a relic of the past. No one is coming to save the economy at the Fed or in the White House, and it’s clear that Trump’s braintrust has no brain or plan to get out of this war that they clearly thought would be as easy as their assault on Venezuela. The only coherent plan in this whole mess seems to be Iran’s goal to make the economic fallout from this war so painful that it serves as its own deterrent in the future, and you can now see this harrowing realization washing over global markets that are all becoming increasingly fearful by the day.