GoKawiilSource: CNBC, Financial Times, BBC, Reuters
At this point it’s almost routine: Almost every time Donald Trump makes a major announcement about the Iran War, that announcement is preceded — sometimes by only a few minutes — by huge and hugely profitable bets in the oil market.
The influential Kobeissi Letter documents the latest example:
BREAKING: According to our analysis, ~$920 million worth of crude oil shorts were taken 70 minutes before an Axios report claimed the US and Iran were near a “14-point” deal to end the war. At 3:40 AM ET today, nearly 10,000 contracts worth of crude oil shorts were taken without any major news. This is equivalent to ~$920 million in notional value, an unusually large trade for 3:40 AM ET. At 4:50 AM ET, just 70 minutes later, Axios reported that the US is “close” to a “memorandum of understanding” to end the Iran War. By 7:00 AM ET, oil prices had fallen over -12% with these crude oil shorts gaining approximately +$125 million. Minutes later, Iran launched the “Persian Gulf Strait Authority” and oil prices surged +8%. What just happened?
As the BBC among others has documented, this isn’t the first time, or the second time, that this has happened. Again and again, just before Trump makes announcements that raise hopes about the reopening of the Strait of Hormuz, one or more “whales,” very large traders, sell large quantities of oil futures, almost instantly reaping big profits as prices fall.
What’s truly remarkable is that this keeps happening even though the pattern has become familiar. This tells us two things: The Trump administration is making no real effort to crack down on whoever is trading using inside information, and these inside traders are operating with a complete sense of impunity, assured that they can get away with it.
The stench of corruption is overwhelming. Yet aside from the raw corruption, these incidents also raise a larger question. The insiders ripped off the parties who sold futures to them at what turned out to be very unfavorable prices to the sellers. What broader damage does this kind of unchecked insider trading do?
There’s both a narrow and a broad answer.
The narrow answer involves economic efficiency. How is the functioning of the economy affected by the realization that somebody — it’s not hard to make guesses, but we don’t know for sure — is trading oil futures based on advance knowledge about what will soon appear on Truth Social or Fox News?
It took me a while to figure this out. But I think I have an answer.
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