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Betting On TACO? Oil Slides Despite Unraveling 'Diplomacy' In Iran; Trump Warns China & Russia

Zero Rss
2 weeks 3 days ago
Betting On TACO? Oil Slides Despite Unraveling 'Diplomacy' In Iran; Trump Warns China & Russia Summary
  • Diplomacy signals emerge: Pakistan is reportedly exploring renewed US-Iran talks, while Trump is set to meet Netanyahu next week amid the escalating conflict.
  • War continues with 13th straight night of bombing: The US carried out a 13th straight night of strikes on Iran as Tehran launched fresh attacks on US-linked targets in Bahrain, Jordan, Kuwait, and Iraq.
  • Oil eases: Crude prices fell by week's end despite continued fighting, as scant reports of possible diplomatic efforts outweighed ongoing regional attacks.
  • Trump warns Russia, China: Trump cautioned China and Russia against supplying arms or targeting help to Iran.
  • Political pressure grows at home: A new Fox News poll found most Americans oppose the Iran war, while reports say Trump is increasingly frustrated as the conflict drags on.
//--> //--> //--> Kharg Island no longer under Iranian control by August 31?
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Oil Eases by Week's End on Signs of 'Diplomacy Lite'

Somewhat surprisingly, oil prices are pushing lower by week's close, especially after a succession of perhaps 'diplomacy-lite' headlines; however, the reality still remains is that the bombing campaign is escalating... and typically the region witnesses the biggest bombs away on a weekend, with markets closed:

  • Pakistan exploring path toward resuming US-Iran talks: Reuters
  • Pakistan's push to resume talks follows pressure from China: Reuters
  • Houthis say they don't seek to close key Bab al-Mandeb Strait (only for Saudi shipping, they say)
  • Trump to meet Netanyahu at the White House on Tuesday amid Iran escalation

 

Trump on China, Russia Assistance to Iran

President Trump took to Truth Social to warn China and Russia against giving or selling arms to Iran, saying: "If they did, it would be very bad for them". However he also sought to clarify: "In my opinion, (they are) not participating."

Doing so was "certainly not in their best interests" - the president added. The president addressed a Reuters report that alleged Iranian strikes on CIA targets in the Gulf earlier in the war is being investigated, on concerns that Russia or China may have helped with such targeting.

Xi "told me he would not," Trump wrote. Was there a pinky promise?...

Iraqi Prime Minister Denies NYT Report on Ceasefire Offer

The latest little peace overture by Washington widely reported Thursday night was apparently a big nothingburger, as on Friday the Iraqi prime minister’s office has denied a New York Times report claiming that Iran rejected a US ceasefire proposal delivered to Tehran by Iraqi Prime Minister Ali al-Zaidi.

The fresh statement from the prime minister's office said what was published in the Times was "entirely unfounded" and had "no relation to reality." The statement underscored the temporary nature of the proposal and that it was the "only offer on the table" and still left the question of control over the Strait of Hormuz unresolved - and so Tehran was uninterested.

It's also the reality that Tehran wants to see Trump sweat and impose economic and political costs particularly ahead of the midterms in November, where Congressional Republicans must face voters over failing to rein in Trump's Iran war. The Iranians continue to openly voice this, for example in the following from the parliament speaker:

They wanted to punish Iran.

Punished themselves with triple-digit oil instead.

10/10 strategy👏👏👏 pic.twitter.com/w80f1Xzuvk

— محمدباقر قالیباف | MB Ghalibaf (@mb_ghalibaf) July 23, 2026 13th Straight Night of US Bombing

Meanwhile, in what is becoming a brutal, nightly routine, US Central Command (CENTCOM) has wrapped up its 13th consecutive wave of airstrikes against Iran. The Pentagon said it targeted military command centers, drone storage facilities, communication networks, and coastal surveillance sites. 

Iranian state media reported overnight into Friday heavy explosions rocking major hubs across the country, including Khorramabad, Jask, Ahvaz, Bandar Abbas, and the strategic outpost of Qeshm Island. Iranian media further said a US missile strike left four dead and five injured in the key industrial and transportation hub of Ahvaz.

As the bombs fall, Tehran is still signaling that military pressure won't force a cheap surrender - with Iranian Foreign Minister Abbas Araghchi lashing out at the US escalation, warning that "mindless aggression" will only see Trump pay a "heavier price" for a deal to end the war.

More Iran Retaliation on Gulf

Iranian retaliation on US-linked sites in the Gulf have continued at the same steady pace, with on Friday Bahrain's military having intercepted "several treacherous Iranian air attacks" - according to the general command of the Bahrain Defense Force.

The Bahraini military further denounced Iran's "systematic hostile approach" and "criminal attacks targeting civilians". The statement emphasized, "The general command emphasises that the deliberate use of missiles and drones to target civilians and private property constitutes a flagrant violation of international humanitarian law."

Throughout the morning the Iranian military's targets also included locations in Jordan, Kuwait, and northern Iraq. Sky News is reporting that "Explosions were also heard near a base hosting the US in Iraq, near the Erbil International Airport."

Fox Poll says Iran War More Unpopular Then Ever

Fox feeding its Boomer audience some Freedom Viagra with a helping of war crimes on the side:

Fox News discussion about Iran's infrastructure:

"What do you think we might hit first?"

"I don't know if we'll hit it first, but the Damavand plant supplies 40% of Tehran's electricity." pic.twitter.com/VpYVT2X4lI

— The American Conservative (@amconmag) July 23, 2026

But Fox News also reports the results of its latest poll which finds 56% oppose the ongoing American military action against Iran, including 40% who "strongly" oppose. "Disapproval of President Donald Trump’s handling of Iran hit a record high in July," Fox writes.

"A majority of voters oppose U.S. military action, and nearly two thirds think the conflict will last at least a year," the report says.

A Frustrated Trump is in 'Revenge Mode'

 This as The Wall Street Journal does an entire investigative report which should be laughably obvious to any careful observer to what's been going on and the deepening quagmire the US is getting itself into:

As the war in Iran enters its fifth month, Trump is increasingly frustrated that a conflict he once thought would be over in a matter of weeks has dragged on with no end in sight, administration officials and others close to the president said.

Some of Trump’s advisers now worry that the war—which has resulted in higher prices, falling approval ratings and the deaths of more than a dozen U.S. servicemembers—is consuming his presidency and damaging Republicans’ already dim prospects in the coming midterm elections.

Alarmingly, the WSJ noted that Trump seems in "revenge mode" against Tehran, and apparently sees no other options than to try and keep bombing his way out of it. Of course, this script has been written many times - not only during the "Global War on Terror" and this millennium's "forever wars" - but going all the way back to the Vietnam war.

NBC: The four service members being flown from the Middle East to Dover Air Force Base were 28-year-old Angel S. Rampersad of New York, 30-year-old Michael Emmanuel Swinton of North Carolina, 25-year-old Tyler James Feehan of Hawaii and 19-year-old Isabella Gonzales of Texas.

President Trump attends a dignified transfer on Wednesday. War Takes "Toll" on White House: WSJ

The war is said to be taking a heavy "toll" on Trump and his top officials. According to more of what's also been glaringly obvious for anyone who has had a shred of independent thought:

The war is splitting the conservative coalition over which Trump once had an iron grip, worrying some Republicans close to the White House. Longtime Trump allies such as Fox News host Laura Ingraham have used their platforms to express concerns about how the war might affect Republicans in November’s midterm elections. On Monday, she said the “clock is ticking” to the midterms.

“Netanyahu has led us into a horrible conflict filled with lies,” Steve Bannon, a longtime Trump adviser, said. “People can see with their own eyes what’s going on.”

While this part about Netanyahu is true, it is ultimately President Trump who made the decision, after for years prior - and especially on the campaign trail - articulately spelling out that attacking Iran and starting new Mideast wars would be one of most idiotic foreign policy moves a president could make.

Trump on Thursday said he would take funds from Iran to pay for damage inflicted on US bases and assets throughout the war. Iran responded in the following...

Seizing another nation's assets to pay for unrelated future claims is an incendiary precedent.

Those who celebrate or profit from such funds should remember: once governments normalize confiscation, no one's assets are safe. Ensuing chaos will not be pretty or peaceful.

— Seyed Abbas Araghchi (@araghchi) July 24, 2026

Perhaps the utter folly of Operation Epic Fury has finally begun to dawn on the president. WSJ also observed that "Last month, the president was so excited at the prospect of signing the memorandum of understanding with Tehran to reopen the Strait of Hormuz that he was dismissive of Republican allies who said the Iranians would never stick to the agreement, according to a senior administration official. He wanted it to be over, Trump told them."

Tyler Durden Fri, 07/24/2026 - 12:45
Tyler Durden

Nine Potential Commodity Wildcards As "Once-A-Decade" Shocks Become New Normal

Zero Rss
2 weeks 3 days ago
Nine Potential Commodity Wildcards As "Once-A-Decade" Shocks Become New Normal

A growing number of institutional desks sounded alarms over physical commodity markets this week as maritime chokepoint disruptions intensified across the Gulf.

Goldman Sachs, RBC Capital Markets, JPMorgan, and others warned that a tightening physical market could keep Brent firmly in triple-digit territory and drive prices sharply higher if the disruptions persist.

Joining the conversation was Citigroup Senior Commodities Strategist Eric Lee, who warned Thursday that commodity markets have entered an era of near-constant disruption, with geopolitical, climate, and technological shocks increasingly overwhelming traditional supply-and-demand analysis.

Lee warned:

Commodities markets are in an era where geopolitical, climate and technological shocks routinely overwhelm traditional supply-demand analysis. Rather than only what is most likely, investors need to consider what is plausible, and what markets are least prepared for.

The frequency of major commodities market disruptions appears to be rising. Events once considered "once -a-decade" now seem to emerge every year, or even every six months.

Since the early 2000s, markets have navigated the Global Financial Crisis, the Arab Spring, the US shale revolution, OPEC's strategic policy shifts; since 2020, wildcards include COVID-19, the Russia-Ukraine conflict, trade wars, gold-positive macro concerns, weather-driven agricultural disruptions, and repeated Middle East conflicts.

Timeline showing notable wildcards and shocks impacting commodities, 2000-2026

List of notable wildcards and shocks impacting commodities:

Lee outlined nine high-impact commodity-market wildcards for the second half of 2026 and beyond, warning that the scenarios are not base-case forecasts but risks with consequences too large for investors to ignore:

  1. US-Iran conflict goes from temporary shock to multi-year disruption of Gulf oil production capacity, driving crude oil to $150+, wholesale refined products to $200+, US retail gasoline to $6/gal sustained.

  2. Russia-Ukraine escalation drives renewed oil and gas export restrictions: this could be even more bullish for global gas than for oil.

  3. Critical minerals hoarding goes into overdrive: drives copper to $20k/t and more.

  4. Gold falls another 15–20% near-term before doubling.

  5. Hyper El Niño and other extreme weather: drives ag price spikes, e.g. cocoa back to >$10k/t.

  6. AI boom and bust: buffet electricity, natural gas, uranium, and power-infrastructure metals like copper and aluminium one way, and gold the other way.

  7. Trade war hits US farmers again: US-China trade war resumes, hitting US ag exports, which could push corn below $4.2/bu and soybeans below $10/bu.

  8. 2030 LNG glut worsens on Russian Power of Siberia 2 gas pipeline to China: driving global LNG prices like JKM down to $5–6/MMBtu.

  9. Monroe Doctrine extreme: US blockades all Americas oil exports, driving global oil prices to well above $100/bbl, while US benchmarks might be discounted by over $30/bbl.

A look at the Bloomberg Commodity Index (BCOM), a widely tracked commodity-futures benchmark, shows the broader complex, spanning energy, agriculture, metals, and livestock, continuing to climb from its Covid-era lows.

Professional subscribers can access deeper commodity analysis at our new Marketdesk.ai portal.

Tyler Durden Fri, 07/24/2026 - 12:40
Tyler Durden

AI Capex Depreciation Risk Is The Catch To Record Earnings

Zero Rss
2 weeks 3 days ago
AI Capex Depreciation Risk Is The Catch To Record Earnings

Authored by Lance Roberts via RealInvestmentAdvice.com,

The second-quarter earnings season is in full swing. So far, the results are landing in line or better than the upwardly revised Wall Street estimates. That’s the opposite of how this usually works. Analysts normally trim their forecasts as a year wears on. In 2026, they’ve done the opposite. The S&P 500 is on track to grow earnings north of 20% for a second straight quarter. The earnings are real. However, a meaningful slice of them is also an accident of accounting timing. That timing, the AI capex depreciation risk, hasn’t hit the income statement yet. But it is about to turn from a tailwind into a headwind.

Alphabet handed investors a live example last week. The headline read earnings up 294%. Peel back a $99 billion paper gain on its stakes in Anthropic and SpaceX, and per-share earnings came in around $2.85 against a $2.88 estimate, with the core business growing a solid but ordinary 30%.6 That gain is one kind of distortion, and it can reverse the moment those private valuations move. The distortion this piece is about is quieter and larger, the depreciation bill on the AI buildout that today’s reported earnings have barely begun to absorb.

The Golden Window

Currently, the entire earnings growth story is concentrated in the semiconductor and AI-infrastructure names. The accounting underneath it is where the catch hides.2 Here is what I mean. When Nvidia sells a chip, it books the revenue and the profit almost immediately. The hyperscaler buying that chip does the opposite. It records the purchase as a capital asset and spreads the cost across years through depreciation. So the seller’s earnings jump now, while the buyer’s costs arrive later, in slow motion.

Here’s what makes this run unusual. Analysts normally walk their forecasts down as the year unfolds. Over the past five years, consensus has trimmed full-year estimates by about 2% on average at this point on the calendar.4 In 2026, they’ve gone the other way. The full-year S&P 500 earnings growth estimate has climbed from roughly 14% in February to north of 23% now, a swing of nearly nine percentage points in the wrong direction for anyone expecting the usual fade. With Q2 results landing through late July, that bar keeps moving higher.

That upward march is the golden window in motion. Every beat this quarter lifts the bar for the next one, and the more confidently the Street marks earnings higher, the more those forward numbers lean on costs that haven’t shown up yet. Make no mistake: this is the same setup I flagged in “Earnings Estimate Revisions Are Very Optimistic.” The AI capex depreciation missing from today’s numbers is exactly what those rising estimates are quietly assuming away.

Todd Castagno at Morgan Stanley calls this “a golden window where everybody looks good.”2 He’s right. Revenues and margins look strong among chipmakers and the companies buying the chips at the same time, which is exactly the kind of broad, simultaneous strength that convinces investors a cycle is durable rather than borrowed from the future. Make no mistake, there’s nothing improper here. This is how companies book capital assets. What’s different this cycle is the sheer scale of the spending, and the eventual AI capex depreciation is being overlooked.

Where The Bill Actually Lands

Here’s the problem with the everything-is-fine read. The spending is enormous, and it shows up in cash long before it shows up in earnings. The five biggest hyperscalers, Alphabet, Amazon, Meta, Microsoft, and Oracle, spent about $412 billion on capex in 2025.2 For 2026, the estimates run to roughly $760 billion.2,3 Yet the AI capex depreciation and amortization that those companies expect to recognize against all that spending in 2026 is only about $211 billion.

Read those two numbers again. They’re spending $760 billion and expensing $211 billion. The other $549 billion sits on the balance sheet, waiting. It becomes an earnings cost later, once the equipment goes into service and the AI capital depreciation clock starts. A good chunk of it isn’t even running yet, because the data centers housing it are still under construction.

The cleanest way to see the gap is the cash. For 2026, combined free cash flow at those five companies is projected to fall 91% to about $16 billion, while net income is projected to rise 25% to roughly $506 billion.2 A business can report half a trillion dollars of profit and throw off almost no cash in the same year. That’s not fraud. That’s depreciation timing. You don’t have to wait for the full-year math to see it. In the second quarter alone, Alphabet spent $44.9 billion on capital projects, more than double a year earlier, and its free cash flow swung to negative $5.9 billion even as it booked $40.8 billion of operating income.6 The cash is already walking out the door. The reported profit hasn’t flinched.

The Number Nobody Can Model

However, here is where it gets interesting. If depreciation is the future cost of today’s earnings, you’d want analysts to have a tight handle on it. They don’t. Look at the consensus estimates for Meta in 2028. The standard deviation of the revenue forecasts is just 4% of the average. The standard deviation on the depreciation-and-amortization forecasts blows out to 24%, six times wider.2 Translation: analysts broadly agree on what Meta will sell. They have almost no agreement on what it will cost to run the machines that produce it.

Why so uncertain? A few reasons. Most of these firms only shifted from asset-light to capital-heavy models in the past few years, so there’s little history to model against. Companies also have wide latitude to lengthen or shorten the useful lives they assign to equipment, and that single assumption swings the annual depreciation number significantly. On top of that, a growing share of the buildout is financed off-balance-sheet. As David Zion of Zion Research Group puts it, consensus depreciation estimates “could be systematically understated.”2 

You can already hear the pressure building in the guidance. On last week’s call, Alphabet’s finance chief told analysts the infrastructure ramp will keep weighing on the income statement through higher depreciation expense.6 Management knows the bill is coming. What nobody can pin down is how large it gets.

That table is the entire bull case in five rows. The market isn’t paying for the $16 billion. It’s paying for the snapback to $387 billion. And the snapback is an assumption, not a result.

“You’re paying 22 times earnings today for profits whose single biggest future expense the analysts modeling them can’t agree on within a quarter of a trillion dollars. That’s the catch.”

“But The Revenue Will Come”

Let me steel-man the optimists, because they aren’t wrong about everything. The consensus view holds that capex growth tapers after 2026 while revenue keeps climbing, so free cash flow rebounds in a clean “V.” The same forecasts that show $16 billion in free cash flow this year also show it recovering to $185 billion in 2028 and $387 billion in 2029, with earnings compounding at around 20% a year through the end of the decade.2 If that plays out, today’s multiple looks reasonable in hindsight, and the depreciation wave gets buried under a bigger revenue wave.

Put real numbers on the bet. Consensus has the five hyperscalers’ capex climbing from $412 billion in 2025 to roughly $760 billion this year, then to about $820 billion in 2027 and $930 billion in 2028.2,5 Watch the growth rate, not the level. Spending jumps 84% into 2026, then the annual increase collapses to single digits. That deceleration is the entire argument. If capex growth stalls while net income keeps compounding near 20% a year, free cash flow snaps back on its own, because the cash stops rushing out the door faster than it comes in. The chart below is the bull case drawn to scale.

It’s a coherent story. It also leans on a capex taper the same companies have run straight through at nearly every guide. Each time the Street pencils in a slowdown, the next quarter’s guidance lands higher. The 2026 consensus alone climbed from about $600 billion last November to $760 billion by February.3 So the model that gets you back to $387 billion of free cash flow assumes spending discipline from an industry that hasn’t shown any. Last week made the point again. Alphabet lifted its 2026 capital budget to as much as $205 billion, up from $190 billion just a quarter earlier, and told investors to expect spending to rise significantly again in 2027.6 That is the opposite of a taper.

Maybe. But notice everything that case requires. It needs capex to slow on schedule, revenue to accelerate on schedule, and depreciation that everyone admits they can’t model to behave itself along the way. Bob Farrell’s Rule #9 has aged well for a reason. When all the experts and forecasts agree, something else usually happens. The V-shaped recovery isn’t a forecast. It’s an assumption wearing a forecast’s clothes.

The issue is NOT whether AI is real. It is. The issue is whether the price already paid assumes a clean landing that the people closest to the numbers can’t promise.

What This Means For Your Portfolio

So what do you do with it? Start with the multiple. The S&P 500 trades around 22 times forward earnings, above its historical average, and that’s before the depreciation wave ramps.1 If the forward earnings inside that ratio are flattered by deferred costs, then the real multiple on fully loaded earnings is higher than the sticker says. You’re paying more than it looks.

I made a related point last month in Earnings Estimate Revisions Are Very Optimistic. Strip AI infrastructure out of the index, and the other 470-odd companies have seen their 2026 earnings estimates revised lower over the prior 17 months. This is the same warning from a different angle. The index’s earnings engine is concentrated in a handful of names. Notably, a chunk of those names’ reported profits carries a deferred bill that the consensus is probably underpricing. Concentration risk and earnings-quality risk are now stacking on top of each other. I walked through the valuation side of this in Parabolic Semiconductor Rally Is Pricing In 2028 Already as well.

While we continue to hold AI infrastructure positions. But we also continue to manage that risk. We will trim the names that have done the most work, hedge the largest exposures while protection is still cheap, and you keep dry powder for the first real disappointment. Howard Marks has spent a career making the same point. The riskiest moment is usually the one that feels the safest.

The AI capex depreciation wave is coming. That part isn’t in dispute. The only open questions are how big it is, when exactly it lands, and whether the revenue arrives in time to absorb it. Right now, the market is answering all three with optimism and pricing the answer as though it were already known. When the first hyperscaler guides depreciation higher than the Street modeled, the golden window closes fast. Better to position for that before the tape forces the issue.

Tyler Durden Fri, 07/24/2026 - 12:20
Tyler Durden

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