Why Inflation Expectations Get Overemphasized

US President Trump’s Iranian deadline concerns markets as escalation will do further damage to regional infrastructure. If the US or Iran attacks desalination plants, the ability of people to remain in the region is questioned. Destroying energy infrastructure delays oil market normalization beyond when Iran chooses to reopen the Strait of Hormuz. Markets’ bias to optimism and a pattern of the US delaying its deadlines have muted the price response.