By Greg Ip
The oil market unfolded in a familiar way last Monday. The day began with reports that Iran had stopped talking to the U.S. through mediators, sending oil up $3 a barrel.
Then that afternoon, President Trump posted on social media that Israel was pulling back in Lebanon, and Hezbollah had agreed to stop shooting. Oil dropped $1. Less than 15 minutes later, Trump posted that talks with Iran were proceeding at a "rapid pace." Oil fell an additional 50 cents.
By week's end, Hezbollah and Israel were still exchanging fire, and talks with Iran had yielded no agreement. Still, the episode reinforced a pattern in place throughout the war. Through verbal interventions, Trump has repeatedly taken the steam out of oil prices -- not by restoring oil flows but by inflicting losses on those betting he won't.
It's not just oil. Trump and his officials have pushed around stocks, interest rates, foreign exchange and mortgages. They don't necessarily say they are targeting the market, but that's what investors assume.
Past presidents thought their job was to deliver on the fundamentals and let markets take care of themselves. Intervention was generally limited to emergencies: tapping the Strategic Petroleum Reserve during geopolitical disruptions, arranging a bailout amid a financial crisis, or joining allies to stabilize currency markets.
Trump and his officials are more obsessed with markets and willing to steer them. Treasury, at the direction of Secretary Scott Bessent, a former hedge-fund manager, bought pesos to support Argentine President Javier Milei ahead of a crucial legislative election last year. In January, it signaled it might buy yen, then under severe downward pressure. Both currencies rallied.
Last January, Trump ordered Fannie Mae and Freddie Mac to buy $200 billion of mortgage-backed securities in a bid to lower mortgage rates. Yields on the securities promptly dropped a 10th of a percentage point.
Investors may disagree with Trump on the direction of markets but can't ignore him. The U.S. president can stop or start wars, inject billions of dollars of public money into markets and topple foreign heads of state. The mere possibility makes betting against him dangerous. "The market has to assume he has information that the public is not privy to, " said Jim Ritterbusch, who runs his own oil advisory trading firm.
Ordinarily, investors respond to an oil-supply disruption by taking a "long" position, which profits from a rising price (a "short" position profits from a falling price) using futures and options. This may push the price above what fundamental supply and demand predict, resulting in a risk premium.
After Russia invaded Ukraine in early 2022, the ratio of net long to net short positions rose to a historically high seven, according to Ritterbusch.
The war with Iran took far more oil off the market. Yet the ratio of longs to shorts rose only to 4, and it has since fallen to 2.7, Ritterbusch said.
"Speculators have just been reticent about getting in on the long side" for fear a Trump comment sends the price plunging. One bullish client "feels he's going to be right eventually" but "keeps getting slammed with margin calls," i.e., demands to repay a loan that financed his position.
"Everybody is bullish, but nobody is long," said Ilia Bouchouev, who once ran derivatives trading for Koch Global Partners and is senior research fellow with the Oxford Institute for Energy Studies. "I'm not a politician, I'm a trader, but I give credit where credit is due: Somehow the administration was able to destroy the sentiment of the bulls."
Some hedge funds have to sell when a price drops 5%, Bouchouev said. They won't buy oil "when a single tweet can drop the market by 10%. Why risk my job, my investors' money?"
The result is a risk discount, rather than a risk premium, in oil futures.
Futures don't move in lockstep with the price at which physical oil changes hands. But the futures market is far larger. Petroleum futures and options turnover on the Intercontinental Exchange is roughly 40 times daily oil consumption, Bouchouev estimates. And it is much more sensitive to sentiment. Trump's repeated promises of a quick end to the war could be why futures were as much as $30 lower than physical prices in April.
That spread has narrowed since, suggesting fundamental factors, such as lower Chinese imports and increased Venezuelan exports, are why prices haven't jumped. Yet even if Trump's interventions can't be quantified, their effect is undeniable.
The same is true for interest rates. While long-term bond yields have risen this year, the increase has been relatively small, given the forces pressing them higher: Trump's attacks on the Federal Reserve's independence, stubbornly high inflation and enormous budget deficits. Trump's jawboning could be why.
Last year, he repeatedly pressured then-Fed Chair Jerome Powell to cut interest rates (he resisted) and promised to replace him with someone who would. Many of the candidates to succeed Powell, whose term as chair ended in May, publicly called for lower rates. That included two sitting Fed governors, Chris Waller and Michelle Bowman, who cast dissenting votes in favor of lower rates that July.
Those governors thought a weakening labor market merited a cut. Powell eventually came to the same conclusion. Yet the process may have been helped along by the proclamations of Trump and potential Powell successors, which caused markets to discount more rate cuts than the Fed itself initially anticipated.
That probably put downward pressure on bond yields. So did suspicions that if yields got too high, the Treasury could respond by selling fewer bonds or even buying some back, or the Fed could adjust the size of its bondholdings.
Critics often claim that Trump lets himself be manipulated by markets. He announced steep tariffs in April of last year, then after stocks plummeted, dialed them back. "Trump Always Chickens Out," or TACO, became Wall Street's mantra.
But markets were, arguably, manipulated by Trump. His retreat was only partial: The effective U.S. tariff by the end of July was 15%, according to JPMorgan Chase, down from 26% in early April but up dramatically from 2.3% before he took office. Investors, meanwhile, had driven stocks to a record, newly reluctant to bet Trump would do anything to undermine them.
This all suggests Trump has been more successful at bending markets in his direction than is widely recognized. The question then becomes: to what end? Where are the concrete economic benefits?
On oil prices, Trump can accomplish only so much by crushing speculators; eventually, supply and demand take charge. And for consumers, those fundamentals point to little relief soon.
Tariffs haven't led to faster economic growth broadly or in the most protected industries. And while interest rates are lower than when he took office, that victory might be fleeting. Inflation is higher than when Trump took office. Budget deficits keep grinding higher.
After Friday's blowout jobs report, the Nasdaq Composite Index recorded its worst day in more than a year as investors increased bets that Kevin Warsh, Trump's newly installed Fed chair, may actually have to raise rates. Kevin Hassett, top economic adviser to Trump, said on the contrary, the Fed can actually cut. We'll see who is right.
Write to Greg Ip at greg.ip@wsj.com
(END) Dow Jones Newswires
June 06, 2026 21:00 ET (01:00 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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