Comments: Oil prices rose after Trump’s speech, with Brent rising to $110 a barrel after briefly falling to $99 on Wednesday on hopes that he will soon make a deal with Iran.
Stocks fell overnight in Asia and Europe, and opened higher in early trading in New York on Thursday. Stocks later rallied and ended with modest gains.
Why it’s important: Speaking directly to the American people, Trump made what may have been his best case for joining Israel in attacking Iran, even as he exaggerated the immediate threat to the US from the country’s missiles and nuclear power.
He urged patience, noting that the airstrikes have been going on for only 32 days compared to previous US wars that have lasted years.
“This is a real investment in your children and the future of your grandchildren,” he said.
But the financial world is very focused on the economic threat.
As the war continues, more costs to American consumers and businesses come from higher oil prices.
What they say: Compared to pre-war oil prices, consumers will need to spend $150 billion on the same goods and services next year, according to a Moody’s Analytics report. That’s more than what they’ll get in tax cuts from the One Big Beautiful Bill Act in 2026.
“So instead of the OBBBA being a source of financial stimulus, which supports strong growth, it seems that it will only help to ease the financial crisis,” the report said.
By Thursday afternoon, Brent crude, the world’s oil benchmark, was up 50 percent on the futures market since the conflict began on Feb. 28. The price of Brent in the physical market – also known as the spot price – exceeded $140 a barrel for the first time since 2008.
The price will rise further if Iran is able to destroy additional production facilities in the Persian Gulf.
The main issue is inflation, which is running at high levels and could worsen if energy costs remain high for a long time. That could force consumers to shift spending to other goods and services, stressing businesses and possibly causing recessions and recessions.
What’s next: Trump has said that the US will continue to reduce military and government targets in Iran.
“We’re going to hit them very hard in the next two to three weeks,” Trump said. “We’ll take them back to the Stone Age, where they belong.”
While he was hopeful for a negotiated solution, he also vowed to attack public services.
“If there is no agreement, we will hit every single one of their power plants very hard and probably at the same time,” he said. “We have not reached their oil, although it is the easiest target of all, because it would not give them the slightest chance of survival or recovery. But we can hit it and it will be gone.”
Trump dismissed the question of reopening the Strait of Hormuz, through which a fifth of the world’s oil and the same part of natural gas are transported. Measured as a percentage of the world’s supply destroyed, the war caused the worst energy crisis ever.
The president instead downplayed the importance of the strait, pointing out that the US does not import much oil from the Middle East. It’s true – the US is an exporter of raw materials. But prices are set on the world market, and Americans will continue to pay more for gas and diesel as long as exports through the strait are blocked by Iran.
Thursday’s Brent surge was moderated after Iran’s state news agency reported that the government was working on a plan with Oman to control tanker traffic, indicating it may resume allowing tankers affiliated with the US and its allies to travel through the waterway. In afternoon trading, Brent was up 7.5 percent to $109 a barrel.
Final thought: At one point in his speech the president fell into a wishful thinking.
He said: “When this conflict is over, the noise will open up naturally. It will open up naturally.
It was reminiscent of his comments at the beginning of the COVID crisis, when he said, “You know it – you know it’s going away, and it’s going to go away. And we’re going to have a big victory.”
We know how that worked.
Trump hoped his speech would buy him time to find a better way to end the war before the economic damage took its toll.
As far as investors are concerned, the promised two or three weeks is forever.
Larry Edelman can be reached at larry.edelman@globe.com.
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