Trump's erratic moves sharpen U.S.-Iran clash and rattle oil markets

By Long Yue | Source: The Wall Street Journal April 23 marked the eighth week of the U.S.-Iran war. Days earlier, markets had started to price in de-escalation: a Israel-Lebanon ceasefire took hold, Tehran said the Strait of Hormuz would reopen, and talks in Islamabad appeared close. That brief calm ended after Donald Trump said the U.S. maritime blockade would remain in place and ordered inspections of ships bound for Iran. Iran responded by shutting the strait again and rejecting a second round of negotiations. The conflict has taken on a defining feature: volatility driven by the U.S. president's impulses. New insider accounts from U.S. media depict a White House scrambling to manage decision-making as policy lurches from hour to hour, amplifying geopolitical risk and sending energy markets into disorder. A "mad king" kept outside the room According to the account, the management style became clear over Easter weekend. A U.S. military F-15 was shot down over Iranian airspace and both pilots went missing. Trump berated staff for hours, complaining that "Europeans gave no help at all," while fixating on the political damage that images reminiscent of the 1979 hostage crisis could inflict. U.S. gasoline prices had climbed to a national average of $4.09 a gallon. He pressed the military for an immediate rescue. Advisers concluded his impatience was counterproductive and limited his role, updating him only at key moments as the team monitored the operation nearly minute by minute. Vice President Vance joined a video call from Camp David; White House Chief of Staff Susie Wiles dialed in from Florida. One pilot was found quickly; the second was recovered late Saturday night. Trump went to sleep after 2 a.m. Six hours later, on Easter morning, he posted an expletive-laced message demanding Iran reopen the strait, ending with an Islamic prayer. Senior White House officials described it as unscripted and outside any national security plan. Trump later said he wanted to appear "as unstable and as insulting as possible," believing that was the tone Iranians "would understand." He then asked staff how it had landed. Political scientist John Mearsheimer recently described Trump as a "mad king." Trust collapse derails diplomacy Mearsheimer argued the most valuable ceasefire window opened last Friday when Iran initially allowed traffic through Hormuz as a goodwill gesture. He said Washington should have used the moment to advance talks in Islamabad. Instead, the Trump administration publicly refused to lift the maritime embargo and ordered U.S. forces to intercept, fire on and board Iranian vessels for inspections. Iran reversed course, closing the strait again. The shift reinforced Tehran's repeated claim that U.S. threats and erratic behavior made further negotiations pointless. Analysts say flip-flops at decisive moments have eroded Washington's credibility, strengthening hardliners in Iran who see the U.S. as reckless and unwilling to honor any understanding. Israel's pitch and Washington's loss of control Mearsheimer said the deeper problem is strategic outsourcing: with few exceptions such as Defense Secretary Pete Hegseth, he said many U.S. military and intelligence leaders doubted or opposed the war, warning of high risks including a Hormuz shutdown. Trump dismissed those concerns. In the Situation Room, Israel's Mossad chief David Barnea and Prime Minister Benjamin Netanyahu argued U.S. military dominance would deliver a rapid win and that fears about Hormuz were overblown. Trump, drawn to the idea of a swift, low-cost victory, agreed. After the war began, advisers said he watched footage of strikes inside Iran and assembled daily "victory" edits, praising U.S. military performance. Battlefield optics did not translate into political control. When the strait blockade threatened roughly 20% of global oil supplies, Trump rejected the military's proposal to deploy ground forces to seize Hormuz Island—a key hub that handles about 90% of Iran's oil exports—because of fears of unacceptable U.S. casualties. Separately, Israel struck Iran's largest South Pars gas field without U.S. coordination, forcing Trump to distance himself publicly on social media. Hormuz: the contingency that wasn't The insider accounts and market commentary converge on one point: key decision-makers were unprepared for the consequences of disrupting Hormuz. Before the war, Trump reportedly told his team Iran would likely back down, and if it did not, the U.S. military could manage the problem. When tanker traffic rapidly froze after strikes began, some White House advisers were surprised. Trump later remarked, "Someone with a drone could shut it down." At the Hedgeye Investment Summit on April 23, Bianco Research founder Jim Bianco said the administration had no workable plan for the strait. He said markets can tolerate prolonged debate over nuclear issues, but they cannot tolerate uncertainty over oil flows. Brent crude has climbed above $102, reversing last week's decline. A broken pricing mechanism in crude Bianco warned that the deeper signal is dysfunction in how crude is priced. In typical conditions, spreads among Western Canadian Select, Brent, WTI and spot Oman crude stay within about $1 to $2. He said current dislocations have blown those spreads out to roughly $60, with extreme quotes ranging from $70 on the bearish end to $130 for physical barrels on the bullish end. In his view, such dispersion shows geopolitics has severed the market's physical network. Brent above $102 is only a symptom; the more dangerous issue is the disappearance of a reliable pricing anchor. "No one knows what oil is truly worth," he said, characterizing it as market failure rather than volatility. Risk assets party while consumers crack U.S. equities have continued to set new highs, with traders reacting to Trump's social media signals in a way some liken to meme-stock behavior. Any hint of better news out of the White House has triggered aggressive buying. The same accounts describe Trump, even as the war dragged on, spending time telling donors he deserved the Medal of Honor and reviewing renovation plans for the White House ballroom. Consumer data tells a different story. The University of Michigan Consumer Sentiment Index fell to 47 in March, the lowest level in the survey's 74-year history, reflecting economic despair described as deeper than during the 2008 crisis, the 9/11 attacks and the high-inflation 1970s. With gasoline at $4.09 a gallon, the squeeze on households has intensified even as markets rally—a sharp K-shaped split. Manipulation fears and cross-asset alignment At the same summit, Hedgeye's Keith McCullough said many investors believe Trump has grown comfortable pushing markets in whichever direction he wants, as participants stay focused on single drivers. He said correlations among the U.S. dollar, oil, gold and Bitcoin have risen toward 95%, arguing that anticipating moves in oil and the dollar can effectively map the direction of most assets. He also pointed to Iranian officials circulating LEGO-themed memes mocking the idea that someone reliably shorts oil shortly before Trump announces the strait is "about to open." McCullough called it an "open secret," adding that markets appear indifferent because many share the same incentive: prices higher and momentum intact. The core risk: a system slipping its gears Mearsheimer argued the Trump administration should want a deal for two reasons: escalation cannot deliver a win, and the global economy risks being pushed "off a cliff." Yet Trump alternates between sounding eager for an agreement and signaling the opposite. Analysts describe that inconsistency—not premeditated destruction—as the most dangerous element. Trump has resisted ground operations to seize Hormuz Island while issuing maximal threats online and undercutting advisers attempting to impose discipline. In a high-stakes game of chicken, both sides wait for the other to blink. When one side's decision-maker is unpredictable, the equilibrium becomes impossible to price—and once the dynamic turns unstable, it can be difficult to stop.