Wall Street closes at a record for the first time since end of January
Diana Choyleva wrote an excellent editorial for the Wall Street Journal entitled “The Iran War Is A Boon For The Petrodollar.” She pushes back against claims that the Iran conflict is accelerating the death of the petrodollar. Instead, she argues the opposite: between Iran and Venezuela, the U.S. is defending and bolstering dollar dominance in the oil trade.
The 75-year-old petrodollar system rests on oil being priced and traded in dollars, which keeps the US dollar prominent in all global trade. China has been undermining the petrodollar through yuan settlement systems and by deepening its ties with some Arab nations.
Rather than Iran being a “perfect storm” weakening the petrodollar, as some argue, Choyleva sees American military engagement in Iran as supportive of the dollar. Simply, control the flow of oil, and you control the currency it’s traded in. Most Arab nations back the US campaign against Iran. Importantly, “the security commitment was tested; it held.”
This reinforced the security-for-oil-pricing bargain that underpins the petrodollar system. The removal of Venezuelan President Maduro and influence over Venezuelan oil accomplishes similar goals. If the US controls Western Hemisphere oil reserves, it would command more oil than OPEC combined, thus providing enormous leverage for keeping oil priced in dollars.
The author sees two scenarios for how the war ends. First, an agreement that gives the U.S. influence over Iranian oil flows. Second, US forces seize Kharg Island and police the Strait of Hormuz. In her words, controlling “the choke point through which a fifth of the world’s oil flows.” Either way, both events lead to more dollar-based oil trades, not less.
She concludes:
But those who conclude that the petrodollar is already in its death throes are reading the map upside down. The storm is real. The US dollar is fighting back.
JPM Beats Expectations, But Its Stock Trades Lower
“Buy the rumor, sell the fact” best describes the market’s reaction to JP Morgan’s (JPM) earnings. America’s largest bank handily beat expectations across almost all metrics, yet its stock opened down 2%. What gives:
1. CEO Jamie Dimon’s cautious commentary: While the earnings were great, the forward-looking commentary was cautious. Accordingly, he said his bank is preparing for a wide range of different environments and risks. In particular, Dimon noted
“an increasingly complex set of risks — such as geopolitical tensions and wars, energy price volatility, trade uncertainty, large global fiscal deficits and elevated asset prices.”
2. High expenses: Heading into earnings, the stock was already weighed down by guidance issued late last year that 2026 expenses would exceed $105 billion. That was about 10% above analysts’ expectations. The culprit is AI investments, credit card competition, and branch expansion. The stock fell on that news at the last earnings call, and given that Dimon spoke again about updating technology and integrating AI systems, he likely didn’t calm concerns.
3. Context: JPMorgan’s stock was trading well before the earnings report. It has climbed about 10% since late March, despite higher oil prices and the potential negative impact on its credit book. Thus, a lot of good news was already priced in.
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