In Bonds there is truth. While government bond yields have risen some 40-50 basis points since the Iran War, and yield curves have steepened, we are not in crisis territory yet. However, the risks of “higher for longer” rates, and sustained inflation have risen. These will impact credit markets and potentially trigger a cascading corporate crisis – leading to all kinds of hell that governments and central banks are now ill-equipped to deal with.

The UK is not about to disappear in a puff of smoke because the Gilts Market is having a minor tantrum. But there is a serious Political Competency premium on Gilts, which will rise when the scale of Labour’s defeat becomes apparent, and the Starmer premiership is up against the wall. Trouble ahead.

When staring down the abyss of looming stagflation, a bond market rout, and a reset on the global economy… let’s try to pretend it’s all something else. Christine Legarde would have made a great French President. Of course it’s not Stagflation... it’s just... Well? What is it?

The markets are on a tear convinced normalisation is around the next corner. Yet they ignore the reality the Iran war has done significant damage to the global outlook – even if Tehran and Washington kiss and make up tomorrow. I don’t claim to understand the madness of markets and their ability to keep fooling themselves, but I do follow economic history and how events change outcomes.

We think we know the patterns – how markets resonate and repeat. But…. Do we? Every so often the Earth’s polarity shifts – but its never happened in recorded history so we don’t really know. Every so often the World’s basis changes. Make merry while we can. Enjoy what is real. The rest is just numbers. You are measured not by the digits on your bank balance, but by the numbers of your friends.

Oh dear. Last night’s explanation of the War did not go well. What changed except a more unstable and fractured global economy and rising trade, supply chain and conflict risks? When markets are priced for perfection – what happens when reality intrudes. I see bad things arising.

The global economy is inevitably slowing from the deepening Hormuz oil shock. The Americans intend to press on despite the rising costs. While the global economy burns, President Trump is mulling multiple plans to achieve his version of victory. The rest of the World is waking to the reality this war is damaging their economic interests, and wondering how to mitigate the effects.

The cost of Trump’s War on Iran is extraordinary - $1 bln a day plus. War Stocks are being consumed at incredible speed. A request for an additional $200 bln of funding is in the works. The nature of war has changed – it could prove phenomenally destructive, expensive and ruinous to winners and losers alike. Meanwhile the economic outcomes of the war remain in the balance.

Suddenly global markets are reeling – waking up to the reality of the unwinnable Iran War. What will a dramatic shift in sentiment mean for stocks, bonds and commodities as stagflation beckons, and Trump finds himself isolated? There is a growing risk of a liquidity shock to global markets.

Does the steepness of the US yield curve tell us the US Economy is about to boom, or inflation is about to sink the Treasury markets? To figure out which, you need to interrogate the witnesses and look at what the evidence is telling us.