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Rabobank: "The World As We Knew It No Longer Exists"

Zero Rss
1 month 1 week ago
Rabobank: "The World As We Knew It No Longer Exists"

Via Rabobank,

As we move towards the end of another trading week, most action was again dominated by the now ubiquitous market bugbear of geopolitics. Central banks are trying to reassert themselves, but under that shadow, and as everything they understand starts to fall apart around them.

Putin suggested he’s open to peace vs. Ukraine. That would be wonderful. It would also be remarkable given everything we have seen to date and the rumours we hear of imminent escalation – unless the peace is on his terms, of course. Notably, the Ukrainian press says another hard winter looms, which the government is not prepared for, and so does a possible new Russian northern front towards Kyiv.

Trump considered declaring the Iran war over, again, days after he floated renaming Hormuz the Strait of America. We then got other stories pointing out that the White House thinks it’s better to pause this war until after the November midterms, then ramp things up again, as is our base case. The economic war vs. Iran obviously stays in place the while time.

South Korea might send its forces to Hormuz to support the US, becoming the first ally to do so, showing US pressure on Seoul, which had many analysts’ eyes rolling, might achieve a result that could help reduce oil prices. Israel claimed regime change in Tehran is its main goal, which is close to being achieved, and that Hamas and Iran are planning attacks on its citizens globally over next few weeks that it will respond to directly should they occur. That is not to include the substantial risk that these two wars become openly conflated into one larger one on at least two fronts, as open and tacit cooperation between Iran, Russia, North Korea, and China is slowly noticed by a wider circle of Western experts.

Even Argentina is rattling its sabre at the UK over the Falklands again, a claim the US may support if the British refuse to lead on NATO defence spending according to some – as the current UK is incapable of projecting a naval task force to the South Atlantic like it did back in 1982, speaking to a general western decline.

It’s not for nothing that oil, while off yesterday’s peak, is likely to close the week with its largest weekly gain since July, as crack spreads remain staggeringly high and stocks of refined products such as diesel are staggering low.

That is a structurally inflationary backdrop because refined products go into or into moving everything. It can only stop being structural if we know both wars are going to end; or that new refineries are going to be magically built years ahead of schedule; or that demand for everything is going to decline due to high prices, which is stagflationary. Neither of the first two are true, and the latter will have huge political consequences. From a geopolitical perspective, you can make peace on your opponent’s terms --but neither Ukraine with its drones nor Israel with its nukes will sign-- to bring oil down; or you can arm up to bring them and it down. Central banks are secondary to that dynamic except where they act on ‘second round effects’ or help on the peace or ‘arm up’ fronts.

Markets can cheer another Fed speech from Waller that suggests that maybe rates don’t have to go up this month. It doesn’t change the above – politicians will or little will.

Markets can watch as JPY swings on heavy intervention again ahead of the BOJ almost certainly raising rates this month. It doesn’t change the above – politicians will or little will. On which note, the BOJ looks like it’s being leaned on by Bessent to hike, who also wants to ensure JPY rises to stabilise US markets. Also watch the reported 155 level in JPY, beyond which we could see accumulated shorts unwound, pushing the currency even further. Indeed, when things unwind it’s a “slowly at first then all at once” non-linear process – and not just in markets, even if they then have to try and price for them.

The Australian financial press just ran an op-ed calling for negative immigration, not lower net immigration, which would have been as unthinkable a few years ago as a collapsing housing market against which the RBA is likely to have to hike again. The same is happening in the US to some degree and various parties on the right in Europe are also talking about the same. Were it to occur, many political norms and economic assumptions built over the past few decades stop working.

As VW sheds 50,000 jobs and closes plants, the Netherlands Scientific Council for Government Policy (WRR) argued the neo-mercantilist global backdrop leaves Europe vulnerable. It narrows EU options to: “international co-ordination”, i.e., a Plaza Accord for China; “strategic symmetry” to mirror China, requiring “the ECB to depart from its current policy of a freely floating exchange rate”; or “stronger trade defence measures”, i.e., tariffs, and maybe taxing capital inflows.

It notes:

“Clearly there is no easy pathway…This reflects the fundamental tension at the heart of this debate: the desire to maintain the international multilateral trade framework that has brought a great deal to Europe and to the world… At the same time, the issue of growing trade imbalances cannot be resolved within that framework, because it lacks the appropriate instruments.”

It concludes four things, three of which are:

  1. Industrial policy is important, but by itself not enough to tackle strategic dependencies. Formulate a strategy that addresses both trade imbalances and innovation.

  2. Doing nothing also comes at a high price. Therefore, to address trade imbalances, all options need to be on the table, even if they are painful.

  3. Europe is lagging behind when it comes to applying and scaling up technological innovations. Commit to a coherent European innovation system.

OpenAI claims it has overtaken Anthropic with its latest AI model, which is says could be considered to be “Artificial General Intelligence” or AGI. Is this marketing hype, or have we just had a true Manhattan Project moment that transforms everything? Who knows. But would you like to guess where equities, rates, FX, and commodities should sit if the US just developed a true AGI that can now improve itself at a non-linear rate? Now do it assuming we have two major, conflating, wars going on.

In the US, Democrats refused to support a constitutional amendment to keep the Supreme Court capped at nine justices, as the Democratic Socialist Alliance refused to back populist Democrat AOC as a 2028 presidential candidate because she is ‘too mainstream.’ The DOJ also asked the Supreme Court to rule on the White House’s new executive order on mail-in voting, which could have a major impact on both the midterms and all subsequent US elections.  

The fourth WRR conclusion I held back to the end was this: “The world as we knew it no longer exists. Dare to think outside existing frameworks.”

Tyler Durden Fri, 09/04/2026 - 09:40
Tyler Durden

Bessent Announces EU 'Officially Joined' Operation Economic Outcast Against Iran

Zero Rss
1 month 1 week ago
Bessent Announces EU 'Officially Joined' Operation Economic Outcast Against Iran

US Treasury Secretary Scott Bessent announced on X Friday that the EU has "officially joined" Operation Economic Outcast, the sweeping US sanctions campaign to cut Iran out of the international banking system and completely isolate it from the global economy.

"The European Union has officially joined Operation Economic Outcast and we appreciate their strong and early stance," Bessent wrote; however, the European Commission seemed to actually reveal no change in the bloc's measures.

The European Union has officially joined Operation Economic Outcast and we appreciate their strong and early stance. The United States stands firm with our allies in ensuring the murderous Iranian regime cannot exploit the global financial system to fund its nuclear ambitions,…

— Treasury Secretary Scott Bessent (@SecScottBessent) September 3, 2026

"The world is sending a clear message to the Iranian regime: We will not stop until every remaining financial lifeline has been severed," he added.

The EU statement cited by Bessent was published a few days ago when G20 finance ministers and central bank governors opened meetings in Asheville, North Carolina - coming off his prior 'Economic D-Day' announcement against Iran.

The statement in question seems to stop short of Brussels' real and full commitment, but is a mere endorsement. The bloc lays out that it "welcomes efforts at ensuring that Iran ceases its destabilizing activities and engages in peace negotiations with good faith, also through additional economic pressure, including through the US-led Operation Economic Outcast."

It seems to also back Europe's existing measures, as it further states the EU "remains ready to take further measures, where necessary," and pledges to "continue to work closely with the United States and other G7 and international partners to maintain pressure on Iran."

But from there the statement diverges from Bessent, saying the bloc "believes continued diplomatic efforts are necessary to reach a peace settlement, restore regional stability and ensure full freedom of navigation and safe transit through the Strait of Hormuz."

Al Jazeera is among those outlets expressing skepticism at Bessent's claim:

On Thursday evening, Bessent thanked the EU for joining the economic campaign, saying that the world was “sending a clear message to Iran”.

However, the statement from the EU doesn’t clearly say that, but does state that the bloc remains “ready to take further measures, where necessary, to safeguard its security and interests”.

The White House has been signaling that it at this point has little hope of revived direct talks between Tehran and Washington, and nothing much on the negotiating from has been reported for several days, especially after this week's flare-up in fighting.

Financial institutions continue to find out the hard way that we are serious about Operation Economic Outcast. While we hope no more banks will need to be sanctioned, that ultimately depends on how quickly the international community comes to its senses and ceases support of the… https://t.co/66WX31SP5V

— Treasury Secretary Scott Bessent (@SecScottBessent) September 4, 2026

Officials continue to underscore that sanctions and the blockade are really beginning to 'bite' - in a familiar refrain and talking point that was already being echoed for months. But new reporting claims Iranian officials themselves are increasingly conceding this. According to Reuters:

A U.S. campaign to throttle Iran's economy by blockading its oil exports and stopping sanctions evasion is growing increasingly difficult to withstand, three senior Iranian sources said. Washington has in recent weeks ​sought to ratchet up the economic pressure on Tehran, in an effort to extract concessions in any future negotiation that six months of conflict have so far failed to secure

It should be noted that many of the mainstream media's predictions based on the usual "anonymous sources say..." - especially forecasts that include timelines - have fallen completely flat time and again throughout the war:

Meanwhile, the country's financial squeeze is itself biting into Tehran's efforts to get around the sanctions regime, leaving less cash to pay the high premiums required to skirt sanctions illicitly, the sources said.

The rial has fallen to record lows over recent days and one senior source said Iran only has another two months' supply of gasoline, which has to be imported despite domestic oil production because of limited refining capacity.

Also, Vance says don't call it a "war"...

Q: When will this war be over?

Vance: Well, I don't.... I wouldn't call it a war. pic.twitter.com/75xffTPJPk

— Headquarters (@HQNewsNow) September 3, 2026

But leadership in Tehran has been touting that it is ready to face down and endure a long war on all fronts. The Associated Press recently reported, "After six months of war, Iran’s leadership has coalesced around a hard core of military generals and clerics long entrenched in the ruling theocracy. They are ready for a potentially long confrontation with the U.S. and determined to prevent any unrest at home."

Meanwhile, Tehran is publicly sparring with Jordan, in the wake of the latest Iranian ballistic missile launches on key US bases in the Arab country. Jordanian Foreign Minister Ayman Safadi had accused Iran of acting with 'pre-meditation' - batting down its assertion of necessary 'retaliation' against US assets.

Iranian Foreign Minister Abbas Araghchi then blasted Safadi and the Jordanian government, writing on X, according to a translation: "How much time does the Jordanian Foreign Minister believe Iran should wait before responding to an aggressor that respects neither Arab sovereignty nor Iranian sovereignty? And is he truly unaware that Arab airspace, lands, and waters were used in the initial American attacks that resulted in the killing of innocent Iranians?"

Tyler Durden Fri, 09/04/2026 - 09:25
Tyler Durden

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