The oil price breakout is confirming and that's a big problem

The useful part

$100 is the big psychological level in oil and we've broken it today in brent, though not yet in WTI. Technically though, the $93.50 level oil was flirting with yesterday is the more-important level. For a moment, it looked like crude could reject it but today it has cruised through.

How it works

• However even in a case where only Iran's oil is blocked by the US, that's still a material drain on global supplies that's starting to bite.
• That clears the July high and marks a distinct series of higher lows since MOU peace deal low in early July.
• The rumors of peace deals are being routinely ignored by the market now as it's abundantly clear that both sides are hunkering down.
• There is talk of regime collapse and you never know if that will unfold but if not, they have proven an ability to curb Hormuz flows.
• On the US side, it's a matter of guessing what Trump will do, which is near-impossible.

What to take from it

The risk is that Trump grows too proud -- particularly after the midterms -- and tried to a blind-eye to an oil spike. The problem is that energy inflation can spill over into broader inflation expectations. Fundamentally, Trump has a real problem here and it's now slowing down.

Example or evidence

• The gasoline on the fire is the price of gasoline, which is ratcheting higher.
• Diesel already hit records and gasoline is starting to take off, including a record for Labor Day this weekend.
• There has to be a breaking point somewhere and it's almost beneficial if we can get a spike now, in order to create the pressure for peace.
• Already, we're seeing rising sovereign yields everywhere and US 10-years are withi...

Details worth keeping

WTI is trading up $2.85 at a session high of $95.81 per barrel. For the Iranian side, this is an existential struggle.