Trump Says He Will Finish the Job in Iran The President made his best case so far for attacking the regime in Tehran.

The WSJ Editorial Board

(…) The most important message we heard is that he’s not ending the war until the job is done, and Iran’s leaders would be wise to act accordingly. (…)

Trump assured them that he plans to continue the war to devastating effect if they don’t abandon their nuclear and terror ambitions. He made no offer of a cease-fire.

Mr. Trump said the bombing would continue for at least another two to three weeks, though there was also an implicit threat of possible escalation. He threatened to destroy all of the country’s infrastructure, including its oil facilities and electric power production, if Iran’s leaders decide to go down fighting. Taking out power plants could be counterproductive by hurting the Iranian people we want on our side. But Iran should take the threat seriously, especially regarding its oil. (…)

He may be mistaken in his assertion that the Strait will easily open to oil flows once the bombing stops, but he also showed no sign he wants to walk away with Iran in charge of the Strait. (…)

Now let’s hope he sticks to that message long enough for it to sink in with the many audiences he was trying to reach, at home and abroad.

• “little journey”
• “We have all the cards. They have none.”
• Trump has not ruled out deploying US forces inside Iran, but did not refer to any plan for ground troops in Wednesday’s speech.
• “The hard part is done, so it should be easy,” Trump said.
• “In any event, when this conflict is over, the strait will open up naturally,” “They are going to want to be able to sell oil because that is all they have to try and rebuild,” Trump said. “It will resume the flowing and the gas prices will rapidly come back down. Stock prices will rapidly go back up.”

The Guardian:

(…) Asked about the stockpile of highly enriched uranium (HEU) by Reuters news agency on Wednesday, Trump said: “That’s so far underground, I don’t care about that. We’ll always be watching it by satellite,” he added.

In his address to the nation from the White House on Wednesday night, Trump elaborated: “If we see them make a move, even a move for it, we will hit them with missiles very hard again.” (…)

Nuclear proliferation experts say that if the HEU stock remains under Iranian control at the end of hostilities, it would leave Tehran significantly closer to the capability of making nuclear bombs than the proposed settlement being negotiated in Geneva on 26 February, two days before the war began.

In those US-Iran talks, Iranian officials have said they had proposed diluting the HEU stockpile to low-enriched uranium, and reportedly agreed to keep only a much smaller stock of enriched uranium on its territory.

The Iranian proposal would have also included a multiyear pause in any uranium enrichment and paved the way for a restoration of a comprehensive monitoring regime by the UN nuclear watchdog, the International Atomic Energy Agency (IAEA).

The Omani mediators at the Geneva negotiations thought that significant progress had been made, as did the UK’s national security adviser, Jonathan Powell, who was in Geneva at the time with British nuclear experts.

Another, more technical, round of talks was due to take place the following Monday in Vienna but it never happened, because the US and Israel launched their attack. (…)

The HEU stockpile itself is the consequence of Trump’s decision, in 2018 during his first term, to withdraw from a multilateral nuclear deal agreed three years earlier. That agreement limited the Iranian uranium stockpile to less than 4% enriched. Iran only began making 60% HEU after the agreement fell apart.

“The comment that you can just not worry about the material because you can see it from satellites really fundamentally misunderstands how to manage nuclear risk,” Belcher said. “The issue isn’t just whether we can see the material, it’s whether we can verify, secure and constrain it. And in order to do that, you need diplomacy, inspections and sustained international cooperation.”

• Ahead of Trump’s address, Iranian President Masoud Pezeshkian took the unusual step of releasing a letter addressed to Americans, arguing that his country had no enmity with the US. He warned that “continuing along the path of confrontation is more costly and futile than ever before” and said that attacks on infrastructure — including on energy and industrial sites — directly targeted the Iranian people.
• Experts and organizations like Amnesty International and the ICRC have recently warned that current strikes in the Middle East—including those against Iran’s South Pars Gas Field and regional desalination plants—could be classified as war crimes if they intentionally target civilian survival resources. Attacking infrastructure solely to degrade an adversary’s economy or to influence the population’s will is prohibited by the Geneva Conventions and Additional Protocols .

Trump is playing the War card (see Judgement Call).

Winning with the War card looks scarily iffy, and tremendously costly, any which way one looks at it.

Not winning with the War card would be a US-made geopolitical catastrophe and, importantly, terminal for him and his legacy.

***

John Mauldin yesterday posted this map from J.P. Morgan:

When the war began, many ships were already enroute to their foreign destinations and are still enroute. The dates near each market show when those shipments will end.

This is important because at that point, the impact will become more than higher prices. Some areas will see physical shortages as the shipments stop arriving.

Source: Carl Quintanilla

• Most deliveries in Africa have already stopped.
• Most deliveries in Asia and SE Asia stopped yesterday.
• Most deliveries in Europe will stop April 10.
• Most deliveries in the USA will stop April 15.

The physical shortages force governments into drastic measures to conserve supplies, curbing economic growth. From the FT:

Middle-income and developing economies have been hit first and worst because of the higher energy intensity of their economies. In Asia in particular, they also lack domestic oil and gas production and have relied heavily on supplies from the Middle East. (…)

Asian economies are at the sharp end of the crisis. According to the US Energy Information Administration, 83 per cent of liquefied natural gas and 84 per cent of crude oil shipped through the Strait of Hormuz in 2024 was bound for Asia. (…)

“One should expect a near-term contraction in those economies that are most sensitive to energy imports.” (…)

Alongside drives for energy conservation, some countries are responding to high prices with FX intervention, as energy importers sell Treasury bonds and gold to pay for oil. Others have used their limited fiscal space to subsidise energy prices, which analysts say is short-sighted. (…)

“In essence every policymaker is choosing between a rock and a hard place,” says Clemens Graf von Luckner, a fellow at the Stanford Graduate School of Business and former economist at the World Bank. “You’re using any fiscal space you have for subsidies, which risks a debt crisis if high energy prices persist. They are effectively forced to bet on the situation in the Middle East reversing.” (…)

Even the European Commission is urging member states to conserve energy, including by encouraging populations to drive less. (…)

In a “downside scenario”, with oil prices averaging $135 per barrel in the second quarter of 2026, global GDP would fall 0.5 per cent by the second year of the shock compared with baseline projections, according to the OECD.

Europe would see a bigger hit of 0.75 per cent, while Asia-Pacific OECD countries would be hardest hit with a reduction of 0.95 per cent. (…)

The US is in relatively good position with its own large oil production and heavy oil imports from Canada needed for mid-Western refineries (it’s nice to have friends, sometimes…).

While the US is a net oil exporter, we still import large volumes of oil from other countries. Do you know where we get it? This chart shows American public opinion vs reality.

Source: True Discipline

Americans seem to believe our economy is ten times more dependent on Saudi Arabian oil than it really is. In fact, over 60% of our oil imports come from Canada. (Bruce Mehlman)

But don’t think Americans are not impacted:

Also, US military actions in Venezuela and Iran are directly impacting China’s oil imports. Iran provided around 1.4 million bpd, or about 13% of total Chinese imports, while Venezuela provided approximately 390,000–560,000 bpd. China has been quiet so far but it should shortly speak up.

Trump is scheduled to meet Xi May 14.

US Manufacturing Expands Most Since 2022, Input Costs Jump

The Institute for Supply Management’s gauge of prices paid for manufacturing inputs climbed another 7.8 points to 78.3, remaining at the highest since mid-2022. Over the past two months, the index has advanced 19.3 points, the most in nearly a decade. (…)

ISM’s measure of factory activity edged up to 52.7, boosted by firmer production growth and flattered by an increase in a gauge of supplier deliveries. The pickup in prices paid and longer lead times likely reflect the impact of trade disruptions related to the conflict. (…)

“In March, 64% of comments overall were negative,” Susan Spence, chair of the ISM Manufacturing Business Survey Committee, said in a statement. “Among the negative comments, about 20% cited tariffs and about 40% the war in the Middle East.” (…)

The supplier deliveries index rose to the highest since May 2022. Beyond energy, the Strait of Hormuz is a choke point for products including aluminum, fertilizer, and even helium, which is used in the production of semiconductors. (…)

The ISM report also showed new orders and backlogs grew at a solid, yet slower pace in March. (…)

S&P Global:

The headline index from the report recorded 52.3 in March. That was an improvement from 51.6 in February and indicative of a moderate rate of expansion.

Higher output and new orders helped to support the PMI in March. In both instances, growth rates were solid. Some firms reported an uplift in demand, linked in part to safety stock building and attempts to secure supply and prices following the outbreak of war in the Middle East.

However, growth was mainly domestically driven. International sales continued to decline as tariffs and shipping challenges weighed on foreign demand.

Firms are hopeful that March’s overall increase in sales will be sustained over the coming months, and with planned uplifts to capital expenditure and R&D also noted, confidence in the outlook remained positive overall.

However, worries over energy prices and tariffs meant expectations softened slightly since February. More uncertainty in the outlook also meant some firms engaged in safety stock building, the net result being solid growth in buying activity. Purchasing overall rose to its joint-greatest degree since June 2025, although inventories of inputs were unchanged in March. (…)

Latest data showed that average vendor times deteriorated to the greatest degree in nearly three-and-a-half years as the war in the Middle East led to noticeable disruptions in transportation and exacerbated stock shortages at vendors.

The war in the Middle East also had a noticeable impact on prices during March, principally by raising global energy prices. Manufacturers added that fuel prices had increased, whilst tariffs also continued to push up costs (most notably for aluminum and steel). Overall input prices subsequently rose sharply, with inflation picking up to its highest level since last August.

Wherever possible, firms increased their own charges in response to greater input costs. Factory gate prices rose at a noticeably quicker rate in March, with inflation reaching its highest in seven months.

Retail Sales

Not much media coverage yesterday amid everything else.

Ed Yardeni: “Retail sales data for February confirm that American consumers are still shopping. Headline retail sales rose 0.6% on the month, while control group sales, which feeds directly into GDP, gained 0.5%.”

But that +0.6% MoM jump came after –0.1% in January and 0.0% in December. Meanwhile, my proxy for retail sales inflation is +0.3% in February, –0.3% in January and +0.4% in December.

Last 3 months annualized: nominal sales +2.0%, inflation +1.6%, real sales +0.4%.

Goldman Sachs is even more negative: “Based on the details of the PCE and CPI reports, we estimate real retail sales declined at a 1.3% three-month annualized rate through February.”

The Atlanta Fed’s GDPNow tracker edged down to 1.9% from 2.0% following the release of retail sales data, which reflected a slightly weaker consumer spending contribution to Q1 growth.

Energy prices have surged since the war began, and the Cleveland Fed’s Inflation Nowcasting model shows headline CPI might have jumped 0.84% MoM in March and 3.25% YoY, a sharp step up from 2.4% in February.

Hmmm…

John Authers today:

• Tuesday in New York started with news that Iran had struck a Kuwaiti tanker at dock in Dubai — scarcely the action of a leadership hoping to reduce the tension. But at 12:30 p.m. came reports that President Masoud Pezeshkian had told EU officials that the country was “willing to end the war” but would need guarantees. It’s not much, but it is the clearest official indication we’ve had that Iran might talk. The result was a WACO rally [Will the Ayatollahs Chicken Out?]. Only the days when Trump chickened out of reciprocal tariffs last April and out of tariffs on China in May have seen bigger rallies in the last three years:

• Uncertainty over how long this conflict could last is so extreme that any sign of an interlocutor prepared to discuss a negotiated settlement is like manna from heaven for the markets. Ahead of Pezeshkian’s remarks, Polymarket had been pricing roughly equal chances that the war ends in April, that it carries on into June, or lasts even longer. (…) the odds have shifted, with a 60% shot that the war ends in April and only 20% that it extends beyond June. Such a reduction in uncertainty would make markets happy. It doesn’t mean they should be. The long-term prospects are darkening. Jean Ergas of Tigress Financial Partners argues that Iran’s leadership now has what it wants, which is survival as a regime.
• Further, the guarantees that the regime requires before agreeing to a peace will likely entail a continuing ability to exert control over traffic passing through the Strait of Hormuz.
• Note that the administration’s official foreign policy strategy document, published four months ago, says:

America will always have core interests in ensuring that Gulf energy supplies do not fall into the hands of an outright enemy, that the Strait of Hormuz remains open, [and] that the Red Sea remains navigable.

• Trump may be right politically to pay the price of leaving the chokepoint under effective Iranian control rather than preside over significant US casualties. Safeguarding American lives should be a priority for any president. But it means accepting a far worse strategic position than the US had before the war. Which suggests that it was a mistake to launch this conflict in the first place.
• Oil traders have never been so confident that crude prices will fall. Crude oil is in the deepest contango (meaning that futures are trading at levels that imply prices will come down in the future) on record:

• The resilience of US markets compared to the rest of the world has far more to do with an ongoing rise in profit forecasts than with any great confidence in America as a jurisdiction. The premium that investors had to pay for US companies surged ahead of President Donald Trump’s return to the White House and is now right back where it was three years ago. The decline has continued through the conflict in Iran:

Note that the bond market shares the oil contango, beyond the next 5 years:

Gas Prices Continue to Put Inflationary Pressure on Consumers

As of today, gas prices have increased 30% over the past month, which is feeding directly into U.S. inflation data. The impact is visible from the beginning of March in real-time Truflation data. Our data team also expects this shift to show in the upcoming BLS CPI March release and to continue influencing inflation readings in the months ahead. (…)

Truflation CPI has been increasing rapidly in March 2026, after months of strong disinflation and even deflation across a few major categories.

Today (March 26), Truflation’s independent US inflation index (TruCPI) jumped up again from 1.68% to 1.77%.

MANUFACTURING PMIs

Eurozone: Manufacturing input prices rise at fastest rate since October 2022

The euro area manufacturing sector continued to grow in March, recording modest upticks in both production and new order inflows once again. There was a broad stabilisation of export demand, a positive development relative to the contraction trend seen in the prior eight months, while backlogs of work increased for the first time in almost four years.

The most notable developments were on the supply-side of the economy. March survey data signalled the greatest lengthening of input lead times in just over three-and-a-half years as the war in the Middle East disrupted global logistics markets.

Eurozone manufacturers raised their purchasing activity for the first time since June 2022, even though input price inflation soared to a 41-month high.

The price of goods leaving the factory gate were subsequently raised more aggressively, with the pace of increase at just over a three year high.

New export orders were virtually unchanged from February, although this did mark somewhat of an improvement after successive months of contraction between February 2026 and July 2025.

China: Manufacturing sector continues to expand despite rising price and supply pressures

The headline seasonally adjusted Purchasing Managers’ Index™ (PMI) posted above the 50.0 no-change mark for the fourth month running in March, signalling a sustained improvement in manufacturing sector conditions. The PMI fell from February’s recent peak of 52.1 to 50.8, indicating a slower overall expansion, albeit the second-strongest performance in the past six months. The latest reading was in line with the long-run average since the survey began in 2004. All five components of the PMI had positive impacts in March.

Goods producers in China reported higher inflows of new orders in March, attributed to greater market demand, customer acquisitions, business expansion, promotions and competitive pricing. The rate of expansion eased from February’s multi-year high, but was nevertheless the second-fastest in six months. New export business increased, albeit more slowly than in February.

Production increased for the fourth month running in March, though the rate of growth eased. By sector, expansions were reported at consumer and intermediate goods makers, while a broadly stable trend was indicated for investment goods.

Manufacturers’ backlogs of work increased at a faster rate in March, reflecting the slower increase in production. Higher levels of incomplete orders were attributed to greater customer demand, capacity constraints and personnel changes.

With backlogs and new orders continuing to rise, Chinese goods producers increased headcounts. Employment rose for the third month running, the longest period of job creation since mid-2021. Manufacturers also expanded their purchasing operations for the third consecutive month. In line with the trends for output and new orders, however, the rate of growth slowed from February’s strong pace.

March data indicated pressure on manufacturing supply chains, as lead times lengthened for the first time in five months. Moreover, the degree to which times increased was the greatest since December 2022. Firms linked longer times to supply chain disruptions, rising and volatile input prices and supplier capacity constraints.

Input stocks rose slightly in March, reflecting the slower increase in output. Inventories of finished goods contracted marginally as firms partly fulfilled orders from existing stock.

March data signalled a notable uptick in cost inflationary pressures in the Chinese manufacturing sector. The rate of input price inflation accelerated strongly to the highest since March 2022, and was above the long-run survey average. In line with the trend for input prices, the rate of output price inflation picked up to a four-year high and was above the series average.

The 12-month outlook for production in the Chinese manufacturing sector remained positive in March. Overall sentiment softened from February’s recent peak but remained stronger than in December and January. Confidence was linked to firmer customer demand, investment in production capacity and new products, efficiency improvements and supportive government policies.

Japan: Business conditions improve at slower rate in March

Manufacturing conditions across Japan continued to improve at the end of the first quarter, albeit at a slower pace. Growth in factory output and new orders eased from the solid rates seen in February, which in turn contributed to a softer rise in staff numbers.

Measured overall, new orders expanded for the third straight month in March. Companies that recorded higher sales cited greater demand across a number of product areas, notably semiconductors, AI technology and automotives.

That said, the rate of growth was the softest seen over this period and modest. New export business likewise expanded at a slower rate.

The survey also indicated that the war in the Middle East placed additional upward pressure on costs, which rose to the greatest extent in 19 months. At the same time, firms expressed reduced optimism around the year-ahead outlook
for output.

ASEAN manufacturing sector growth cools and price pressures surge in March

The ASEAN manufacturing sector recorded notable slowdowns in a number of demand indicators in March, as well as sharp upswings in input costs and output charges, translating into the sector’s weakest performance in six months.

Growth in output and new orders was solid and on par, but considerably softer than the sharp expansions recorded in February. This led to slower and only marginal upticks in both purchasing and employment. At the same time, price pressures surged in March, with the survey’s price gauges moving back above their long-run averages.

Solid uplifts in new orders and output were recorded in March, continuing the expansions seen since the middle part of last year. However, new orders rose to the weakest extent since last August, while production growth was the slowest in eight months. Weighing on total new sales was a fresh decline in new export orders.

 

Trump interview: I am strongly considering pulling out of Nato

Donald Trump has told The Telegraph he is strongly considering pulling the United States out of Nato after it failed to join his war on Iran.

The US president labelled the alliance a “paper tiger” and said removing America from the defence treaty was now “beyond reconsideration”.

It is the strongest sign yet that the White House no longer regards Europe as a reliable defence partner following the rejection of Mr Trump’s demand that allies send warships to reopen the Strait of Hormuz.

Mr Trump was asked if he would reconsider the US’s membership of Nato after the conflict.

He replied: “Oh yes, I would say [it’s] beyond reconsideration. I was never swayed by Nato. I always knew they were a paper tiger, and Putin knows that too, by the way.” (…)

The Prime Minister [Sir Keir Starmer] signalled that he would seek a closer relationship with Europe in response to the souring of relations with Washington and said that, “whatever the noise”, he would act in the British interest.

He said: “This is not our war, and we’re not going to get dragged into it.” (…)

Speaking on Fox News in the hours before the interview with Mr Trump, Mr Rubio said America would have to “re-examine” its Nato membership when the war in Iran came to an end.

“I think there’s no doubt, unfortunately, after this conflict is concluded we are going to have to re-examine that relationship.

“If Nato is just about us defending Europe if they’re attacked, but them denying us basing rights when we need them, that’s not a very good arrangement. That’s a hard one to stay engaged in.” (…)

Last week, The Telegraph revealed that Mr Trump was considering a shake-up of Nato designed to punish members who did not meet his funding demands.

Senior members of the administration have pushed for a “pay-to-play model” that could block allies from decision-making, including when the bloc goes to war.

Sources close to the president said he was also considering pulling US troops out of Germany – a move that he has considered since returning to office last year.

Mr Trump’s demand for Nato to help in his war with Iran has led to questions about Article 5, the “attack on one is an attack on all” mutual defence clause.

It has only ever been invoked once – after the 9/11 attacks on the US. More than 1,100 non-US troops were killed in the subsequent war in Afghanistan, including 457 British soldiers.

The clause relates only to when a Nato member is attacked and would therefore not apply to the war in Iran, which began with joint US-Israeli air strikes on Feb 28.

Without initially consulting or inviting other NATO countries.