The oil market on Monday, June 1, unfolded in a pattern that has become familiar during the Iran war, according to traders and analysts cited by the Wall Street Journal. The day began with reports that Iran had stopped talking to the U.S. through mediators, sending oil up $3 a barrel. That afternoon, President Trump posted on social media that Israel was pulling back in Lebanon and Hezbollah had agreed to stop shooting. Oil dropped $1. Less than 15 minutes later, Trump posted that talks with Iran were proceeding at a “rapid pace.” Oil fell an additional 50 cents.
By week’s end, Hezbollah and Israel were still exchanging fire, and talks with Iran had yielded no agreement, the Journal reported. Still, the episode reinforced a pattern in place throughout the war: Through verbal interventions, Trump has repeatedly taken the steam out of oil prices — not by restoring oil flows but by inflicting losses on those betting he won’t, according to the Journal’s analysis.
The pattern extends beyond oil. Trump and his officials have pushed around stocks, interest rates, foreign exchange and mortgages, the Journal reported. Past presidents generally limited market intervention to emergencies — tapping the Strategic Petroleum Reserve during geopolitical disruptions, arranging a bailout amid a financial crisis, or joining allies to stabilize currency markets. Trump and his officials are more willing to steer markets directly, according to the Journal.
Treasury Secretary Scott Bessent, a former hedge-fund manager, directed the Treasury to buy pesos to support Argentine President Javier Milei ahead of a crucial legislative election last year, the Journal reported. In January, the Treasury signaled it might buy yen, then under severe downward pressure. Both currencies rallied.
Last January, Trump ordered Fannie Mae and Freddie Mac to buy $200 billion of mortgage-backed securities in a bid to lower mortgage rates, the Journal reported. Yields on the securities promptly dropped a tenth of a percentage point.
“The market has to assume he has information that the public is not privy to,” Jim Ritterbusch, who runs oil advisory trading firm Ritterbusch and Associates, told the Journal.
The effect on oil futures has been particularly pronounced. After Russia invaded Ukraine in early 2022, the ratio of net long to net short positions rose to a historically high 7, according to Ritterbusch. The war with Iran took far more oil off the market, yet the ratio of longs to shorts rose only to 4 and has since fallen to 2.7, Ritterbusch said.
“Speculators have just been reticent about getting in on the long side” for fear a Trump comment sends the price plunging, Ritterbusch told the Journal. One bullish client “feels he’s going to be right eventually” but “keeps getting slammed with margin calls.”
“Everybody is bullish, but nobody is long,” Ilia Bouchouev, who once ran derivatives trading for Koch Global Partners and is a senior research fellow with the Oxford Institute for Energy Studies, told the Journal. “I’m not a politician, I’m a trader, but I give credit where credit is due: Somehow the administration was able to destroy the sentiment of the bulls.”
Some hedge funds have to sell when a price drops 5%, Bouchouev said. They won’t buy oil “when a single tweet can drop the market by 10%. Why risk my job, my investors’ money?”
The result is a risk discount, rather than a risk premium, in oil futures, the Journal reported. Trump’s repeated promises of a quick end to the war could be why futures were as much as $30 lower than physical prices in April, according to the Journal. That spread has since narrowed, suggesting fundamental factors such as lower Chinese imports and increased Venezuelan exports are also at work.
The same dynamic has played out in interest rates, the Journal reported. While long-term bond yields have risen this year, the increase has been relatively small given the forces pressing them higher: Trump’s attacks on the Federal Reserve’s independence, stubbornly high inflation and enormous budget deficits. Trump’s jawboning could be why, the Journal reported.
Last year, Trump repeatedly pressured then-Fed Chair Jerome Powell to cut interest rates and promised to replace him with someone who would, the Journal reported. Many candidates to succeed Powell, whose term as chair ended in May, publicly called for lower rates, including two sitting Fed governors, Chris Waller and Michelle Bowman, who cast dissenting votes in favor of lower rates in July. Those governors thought a weakening labor market merited a cut. Powell eventually came to the same conclusion.
The process may have been helped along by the proclamations of Trump and potential Powell successors, which caused markets to discount more rate cuts than the Fed itself initially anticipated, the Journal reported. That probably put downward pressure on bond yields, as did suspicions that if yields got too high, the Treasury could respond by selling fewer bonds or buying some back, or the Fed could adjust the size of its bondholdings.
Critics often claim that Trump lets himself be manipulated by markets, the Journal reported. He announced steep tariffs in April of last year, then after stocks plummeted, dialed them back. “Trump Always Chickens Out,” or TACO, became Wall Street’s mantra. But markets were, arguably, manipulated by Trump, the Journal reported. His retreat was only partial: The effective U.S. tariff by the end of July was 15%, according to JPMorgan Chase, down from 26% in early April but up dramatically from 2.3% before he took office. Investors, meanwhile, had driven stocks to a record, newly reluctant to bet Trump would do anything to undermine them.
This all suggests Trump has been more successful at bending markets in his direction than is widely recognized, the Journal reported. The question then becomes: to what end? On oil prices, Trump can accomplish only so much by crushing speculators; eventually, supply and demand take charge. Tariffs haven’t led to faster economic growth broadly or in the most protected industries. And while interest rates are lower than when he took office, that victory might be fleeting. Inflation is higher than when Trump took office. Budget deficits keep grinding higher.
After Friday’s blowout jobs report, the Nasdaq Composite Index recorded its worst day in more than a year as investors increased bets that Kevin Warsh, Trump’s newly installed Fed chair, may actually have to raise rates, the Journal reported. Kevin Hassett, Trump’s top economic adviser, said on the contrary, the Fed can actually cut.