Blain’s Morning Porridge, April 2^nd, 2026 – Markets set to be roiled by Trump’s Iran Consequences

“To go into any war without a Plan B is bad decision making. To declare war without Plan A defies logic.”

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.

Link to Podcast

The market reaction to the Presidential Address says it all. Oil Up. Stocks Down. Was last night the moment confidence cracked?

The risk is that US markets are priced for perfection in what is being revealed as a very imperfect global economy. That US markets have remained detached for this long from the rising consequential threats of destabilising recession and inflation – Stagflation –is a function of markets not prepared to believe bad things happen, or that mistakes are made. It’s not just Iran. The market doesn’t seem to haven’t figured out how the end of globalisation, the rise of isolationism, supply-chain disruptions, economic and geopolitical illiteracy, and diminished national credibility are all threats to the over-valued US markets.

(On the other hand, never forget: the market can always stay irrational longer than you can stay solvent!)

Today, I would characterise US investors as:

• Betting the USA’s energy self-sufficiency means the consequences of a global slowdown will be limited.
• Betting a Tsunami of global dislocation will wash up on American shores as a manageable beach wave.
• Betting the Fed and Treasury will step into to bail markets out if there is a crisis, because that is what they do… don’t they? (Most traders/investors active in markets today don’t remember what it was like before 2007/08, before “buy-the-dip” mentality was grounded in the Fed-Put.)
• Betting US leadership in AI means the future of a changed global economy lies in American Tech – what if someone else is doing it better, cheaper and will less distorting energy demands.
• Betting their government is doing the right thing.

What if the market is fooling itself and is wrong?

Even a small squeeze on corporate earnings, a small rise in real interest rates, a small hike in inflation, or consumers spending a small bit less because Gas prices are taking a bigger chunk of their wallets, will have magnified consequences on market valuations. At present stocks are bouncing in what looks a wide 10% corridor – what if something happens to trigger a chaotic move lower?

Maybe just a small increase in private credit defaults. Maybe just a small rise in bond yields because no one seems willing to fund this year’s $12 trillion Treasury issuance? Maybe just a small fall in earnings and sickly earnings season? Or maybe the President allowing something profoundly stupid to happen?

Small things mount up and mount up suddenly. How did you go broke? Slowly at first…

Why the angst about markets?

The Presidential address to America last night to explain the Iran War was…. insert whatever words you want. There is no polite way to describe Trump’s rambling incoherence. Electing American presidents is not the World’s job – but the consequences of his actions are playing out among us all – and that applies not just to Europe and Asia, but to the USA also.

Let’s try to be honest about the Iran war:

Militarily the mighty US (and Israeli) armed forces have demonstrated unparalleled precision and skill – destroying Iran’s forces wherever they were found. Overwhelming military might demonstrating utter and complete tactical dominance of the battlespace. Text-book stuff which gave Trump and his acolytes plenty to oh and ah about. The effectiveness of US arms will have given the Chinese much to think about – and reminded them the best wars are the ones that are won without fighting.

But wars are not about the numbers of successful precision strikes or body counts – that’s war porn.  Wars are regrettable, they are bloody and tragic, and measured in stark terms of human costs, logistics, credibility and effect. What has Trump’s war really cost America?

Strategically?

America’s credibility has put on the line. While killing schoolgirls on the opening day of the war was a tragic fog-of-warmistake, threatening genocide on the Iran people by bombing power and water infrastructure is a war crime. Because Vladmir Putin does it does not give the American President the option. Our leaders are supposed to be better than that. Insulting America’s traditional allies has proved a mistake – most Brits believe King Charles should back out the planned State Visit to Washington, the ultimate F*** Y**! the UK can send.

The reality is America is on the verge of losing another asymmetric war. The Americans won every battle, every engagement – but neither Donald Trump nor his cabinet can tell us what victory looks like. Iran has been bombed flat, but there has not been regime change, the sea lanes that define the regional and hence global economy are less safe, and there is no sign Iran is prepared to back down. If there really are peace negotiations – Iran goes in with a strong hand. It will be in their interest to secure peace – on their terms.

It looks like Iran has won Operation Idiot Wind: “In the final end he won the war, after losing every battle.”

Geopolitically, the war looks a disaster – compare Trumps blustering braggadocio to Emperor Xi – who has had to say absolutely nothing. Never interrupt your enemies while they are making a mistake. You can imagine Chinese bean counters counting down the $1.75 bln per day the war has cost, and the 25% of America’s missile arsenal that’s been expended to convert rubble in Tehran into smaller pieces of rubble. They will be looking at China’s plentiful war stocks, happy to keep sending Iran enough materials and data to keep fighting. As the US action sucks in yet more of America’s Western Pacific assets, they will be ticking off what is left to defend Taiwan… and planning on how to achieve a bloodless coup.

Regionally, the war looks a disaster for the Gulf States as wake up to backing the least reliable ally on the planet. When the Americans leave a desert and call it victory before sailing away – the Gulf will be left dealing with the consequences of a still there Iran, and will likely be more than happy to accept China offering to mediate a regional peace, and to buy their oil.

The optics are appalling – a huge embarrassment to the 60% of Americans who now deny Trump.

Where do we go from here? Everything feels less stable – but it’s the USA I’ll be watching: how will a cornered, angry Trump react to the 85% likelihood the Democrats take the House in the Midterms and the 52% likelihood they take the Senate? This could get messy.

Let us hope for peace. This weekend is Easter and time to reflect. I’ll be listening the American in Rome rather than the one in DC.

Out of time. Have a peaceful holiday weekend.

Bill Blain

Author of the Morning Porridge
CEO Windshift Capital
Advisor – Spitfire Strategic Capital