Smart Money Is Not Buying Trump’s ‘Ceasefire’ with Iran

On Tuesday, several hours after he casually threatened that “a whole civilization will die tonight,” and a few days after he wrote “Open the Fuckin’ Strait, you crazy bastards, or you’ll be living in Hell – JUST WATCH! Praise be to Allah,” the very normal and not-at-all deranged president of the United States posted to the social media site he owns that he and Iran agreed to “a double sided CEASEFIRE!” Stock markets, which have fully devolved into a circus animal responding to the one stimulus they know, bought the dip hard on the president’s word. Even before this insane AI rally where stock markets are doing their best crypto impression, the concept of smart money in finance was not defined by the number-go-up traders on the floor of the New York Stock Exchange. Smart money trades the boring stuff, the important stuff no one cares about because most people’s eyes reasonably glaze over the moment you say interest rates.

But interest rates are just the price of money, and they are expressions of expected economic growth, inflation fears, and risk. Stock markets get all the hype in our shallow media environment, but there’s a reason why the largest and most liquid market in the entire world trades on what is known as “risk-free” debt, and not Elon Musk promises. United States Treasuries are, or perhaps were, viewed as the only safe port in an economic storm. All of finance begins with the notion that you can lend the United States government money for various periods of time and guaran-damn-tee yourself a certain return, and all investment decisions are based on the risk you must take relative to what is, or maybe was, considered to be “risk-free” debt.

And the risk-free debt markets did not buy this “ceasefire.” Stocks were up 2.5% or more the following day, but the yield curve—the interest rates paid out by the 3 month, 6 month, 1, 2, 3, 5, 7, 10, 20 and 30-year U.S. Treasury Bonds—told a very different and uncomfortable story. You never want to make too much of one day’s price action, especially in a bond market that measures in the aforementioned months and years, but whenever the most important commodity in the world is down over 15%, I think it’s instructive to see what direction everything else is going in that day as a result of it. Stocks are in la la land, so of course they saw Trump’s pinky promise plus oil’s plunge as an unambiguously good thing, but bonds are where promises mean nothing without a corresponding interest rate to express the risk you will break that promise. Part of the front-end of the yield curve did not agree with stocks’ theory on Wednesday that oil is way down, so therefore inflation is of no concern.

OK I think I get it

– Near-term inflation is baked in with the oil shock

– It will lead to lower growth

– Therefore, the market is demanding a term premium

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— Jacob Weindling (@jakeweindling.bsky.social) April 8, 2026 at 2:37 PM

If stocks were right that Trump wasn’t lying this time and the basic economics around the oil shock that is already en route didn’t apply, you would expect to see all red on that screen as yields fell over abated inflation concerns. That only the first year went up, while the rest of the front to the middle of the curve went down, while the long end, the 20- and 30-year loans to the U.S. government, also went up, told yet another stagflationary story in this age of Trumpinomics. We are on the train to uhohville and have yet to get off, so investors are trusting us less to lend us money for mortgage-level periods of time, and they are charging us higher rates because of it. 

Economists agree that for roughly every $10 rise in oil, that will correspond to about a 0.3% rise in inflation. Crude oil futures closed the last week of February at $67.02, right before Trump launched the first strike on Iran on February 28th, and they are currently trading at $96.30 as I write this. Wouldn’t you know it, we also got a Consumer Price Index report for March today, which measures inflation, and headline inflation is now the highest it has been in two years. 

An eye-popping 0.9% *monthly* rise in the CPI was driven mainly by rising energy prices. Core inflation rose a more sedate 0.2% in March.

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— Justin Wolfers (@justinwolfers.bsky.social) April 10, 2026 at 6:50 AM

Stocks are slightly down to flat on this objectively bad news today, while bonds yield are up, which means investors are selling bonds and demanding a higher yield in response to higher inflation. Energy inflation is the most contagious kind of inflation because everything we buy and use at some point uses energy, and that gets baked into prices. Spikes in energy prices do not cause sustained inflation, but sustained rises in energy prices do. During a period where five of seven weeks have finished in the red, stocks have tried to tell themselves a buy-the-dip story about the 2022 Russian invasion of Ukraine. It also spiked gas prices and brought inflation fears with it, which wound up being overhyped, demonstrating how one month of an energy shock is not enough to make a sustained dent. Oil finished the year about where it started, and inflation kept falling until Trump introduced his liberation day tariffs that are now showing up in Producer Price Index reports like February’s. That’s the story stocks are betting on, plus the fact that last year the U.S. economy proved pretty resilient in the face of Trump’s tariffs. 

But the “largest oil supply shock in history” in the Strait of Hormuz isn’t on the same scale as Russia’s invasion, it clearly still is not resolved, and Iran still has another big card to play with Bab-el-Mandeb should tensions rise even more. This passage to the west leading to the Suez Canal controlled almost as much daily oil output as the Strait of Hormuz before the Houthis started firing rockets and drones into this other narrow major shipping lane. They effectively cut oil passage in half through this strait that goes by Israel and delivers goods to Europe, and Iran is openly threatening to shut it down the way they have with Hormuz.

Despite the relatively muted day today that may finish slightly in the red, stocks are likely going to finish the week up around 3% or more from when Trump threatened to wipe out an entire civilization. Bonds are disagreeing with this rosy assessment, as the CPI report today is taken as far more credible than Trump’s posts. Barring some unforseen collapse in the final trading hours of the week, the entire U.S. Treasury yield curve (except for the 3 month) will finish with a higher yield than it had the day before Trump announced this so-called ceasefire that shocker—Israel won’t agree to. Who could have seen that coming!

Bonds. Bonds saw it coming. The day after Trump said all is well and we can get back to normal business, the yield curve contorted itself said, “fuck that shit.” Smart money knew that something stunk between Trump’s supposed 15-point agreement and the also untrustworthy Iranian regime’s announced 10-point plan. Only a fool like a Tesla trader would buy what Trump was selling. Smart money that plans on longer timeframes knows that they have to plan for an oil shock that still is ongoing, and Iran knows that every day they can drag this out is another day that they can add leverage to their position.

The Strait of Hormuz is not open and it never fully opened. It was kind of open for maybe 60 minutes, and Trump is already whining on TruthSocial that Iran is not adhering to the definitely real agreement that totally exists and isn’t just Trump jawboning the stock market again so he can buy more time for his insider trading army. One day nor week does not make a trend, but with oil prices falling as hard as they did this week, some signals had to come out of markets, and I find it still pretty telling that oil is hovering near the not-good level of $100. This “ceasefire” clearly never existed to any real degree, it is still being negotiated, and all Pakistani mediators seemed to do was halt the U.S. bombing of Iran for two weeks—whatever those words are worth. So Iran still gets to squeeze the global economy, but now they don’t have to do it while getting bombed. Art of the deal baby!

All bond markets know for now is that the major stress on global energy markets has not been relieved, CPI is telling us inflation is already here from it, and every day we go without a solution to what many oil analysts have long considered the “doomsday” scenario brings us one day closer to a crisis “three times the severity of the Arab oil embargo and Iranian revolution in the 1970s.”