BZ1! There has been little change in the Iran setup. Hormuz remains effectively closed, Trump is visibly frustrated, and there is still no durable peace deal.

The SPR continues to be drained aggressively. Inventories fell another 3.8m barrels last week to 307.7m, the lowest since March 1983. The four-week draw now stands at roughly 18m barrels. The stockpile is rapidly approaching the point where continued releases lose credibility as a lasting tool to suppress crude.

Trump faces significant pressure heading into the midterms. As I have repeatedly said, he cares about four things: 1) the equity market, 2) inflation prints, 3) yields, and 4) approval ratings. Lower oil helps all four at once.

From my first Iran post before the war began, I was bullish on oil and bearish on Trump's decision to intervene. My view was that this could become a years-long war that the U.S. cannot easily exit. That structural thesis has not changed.

As I laid out in Tactical Positioning | Week of 05.11, Iran still holds two core cards: its nuclear program and leverage over Hormuz. Tehran may compromise on one, but I see no scenario in which it voluntarily gives up both.

For Israel, expansion is existential, while preventing Iran from obtaining a nuclear weapon is non-negotiable. For Tehran, the nuclear program is a deterrent against Israel and the U.S., while control over Hormuz gives it direct leverage over oil prices and Washington. This is the core conundrum. Under the current terms, there is no durable resolution, which is why the war can continue for years.

Trump TACOed last weekend by pausing the strikes. Crude and gasoline dropped sharply during the first half of the week, then rebounded violently as he threatened to strike Iran again. The tape is still trading every escalation and de-escalation headline.

The structural oil setup remains bullish, but the tactical path into the midterms is different. I do not view an imminent surge to new highs as the high-probability outcome. Oil should remain elevated and volatile. Another escalation could retest last week's highs or produce a marginal higher high. But in our view, the odds favor oil grinding lower rather than higher into the election.

I expect the worst to come after the midterms. Any pre-election suppression of crude would only delay the inevitable. It would not resolve Hormuz, Iran's nuclear leverage, or the underlying war.

A sustained close above 103 opens the door to a retest of the YTD high around 120. Technically, crude still carries an upside skew, but its direction is increasingly dictated by Trump's whims.