Hold My Beer While I Poke This Hornet’s Nest.

Well, he did it.

Trump went looking for the most dangerous geopolitical hornet’s nest on the planet, found it and then after a year of screaming at it from the patio, he finally told Melania to “hold my beer” while he ran out into the yard and rammed it with a stick.

The decision to exit the Iran deal has the potential to be the most momentous blunder he’s made yet. That’s not to say it will necessarily turn into a disaster, it’s just to say that the potential is there. One of the many ironic things about his rationale is that for all his implicit and explicit criticism of the IRGC/Quds, Hezbollah and the Houthis, Tuesday’s decision is only going to make things worse in terms of inflaming sectarian tensions and exacerbating regional conflicts. In fact, there’s a solid argument to be made that this decision endangers U.S. forces in the region – we know from the Iraq experience that when you piss on Soleimani’s shoes, he paints a target on the back of U.S. operators in the region, effectively meaning they’re in danger not only from Sunni insurgents but also from Iran-backed militia. That’s another important story arc here.

Treasury says sanctions will be reimposed after 180 days. Here’s the full statement:

On May 8, 2018, the President announced his decision to cease the United States’ participation in the Joint Comprehensive Plan of Action (JCPOA), and to begin re-imposing the U.S. nuclear-related sanctions that were lifted to effectuate the JCPOA sanctions relief, following a wind-down period.  In conjunction with this announcement, the President issued a National Security Presidential Memorandum (NSPM) directing the U.S. Department of the Treasury and other Departments and Agencies to take the actions necessary to implement his decision.

Consistent with the President’s guidance, Departments and Agencies will begin the process of  implementing 90-day and 180-day wind-down periods for activities involving Iran that were consistent with the U.S. sanctions relief specified in the JCPOA.  To effectuate the wind-down periods, today the State Department issued the necessary statutory sanctions waivers to provide for a wind-down period and plans to take appropriate action to keep such waivers in place for the duration of the relevant wind-down periods.  As soon as is administratively feasible, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) expects to revoke, or amend, as appropriate, general and specific licenses issued in connection with the JCPOA.  At that time, OFAC will issue new authorizations to allow the wind down of transactions and activities that were authorized pursuant to the revoked or amended general and specific licenses.  At the end of the 90-day and 180-day wind-down periods, the applicable sanctions will come back into full effect.

“It’s entirely possible that additional sanctions will follow,” John Bolton’s mustache told reporters after Trump was finished talking about Iran’s “bloody ambitions” and secret nuclear programs that Mossad swears are a real thing. Remember the geopolitical “threats” versus “action” chart?

Well don’t be surprised if, very much contrary to what Trump said in his Tuesday announcement, that light blue line starts to converge on the dark blue line.

As far as crude goes, it fell sharply on the original CNN story (which was interpreted as more benign), snapped back on the subsequent NYT story about Macron and then rallied back above $70 once Trump opened his mouth.

Energy stocks were bid, hitting day highs after the announcement:

The dollar was choppy but ultimately, it was up again, underscoring its resiliency and boding ill for emerging markets which are looking more fragile literally by the hour:

Speaking of emerging markets, the Argentine peso hit another low on Tuesday ahead of a central bank decision this afternoon. This of course comes on the heels of three consecutive emergency hikes totaling 1,275bps and we also learned on Tuesday that the country is looking to the IMF for help.

It’s now as volatile as fucking Bitcoin:

The Argentine peso is now almost as volatile as Bitcoin. It's down ~10% in just the past week, the worst performing currency in the world, ignoring rate hikes, cenbank interventions and an IMF credit line. pic.twitter.com/verBuAkqBT

— Camila Russo (@CamiRusso) May 8, 2018

The lira hit another low, falling for a seventh day. 1- year USD-lira Xccy swap rates up more than 30bp to the highest since 2008. Long story short, that situation is completely out of control:

As noted first thing Tuesday morning, Indonesia looks like it’s in trouble too, as the rupiah hit a 28-month low and stocks fell to an eight-month low. They’re burning through reserves, to no avail.

The real looks like it wants to hit 3.60. It was down again early before paring losses:

I don’t follow Brazil as much as I used to, but it seems to me that a push back above 3.60 would either represent an overly pessimistic outlook or else presage something really, really bad for EM. If that’s not the right interpretation, I’m sure someone will e-mail me and tell me about it.

Italian equities dove on Tuesday amid fresh political problems and the prospect of another vote in July:

Stateside, stocks held up ok, all things considered, closing flat. All hail the yellow line:

Treasurys fell but trimmed losses as Trump spoke. Flattening in the afternoon – 5s30s under 31.5bp.

Finally, we’ll leave you with the real President’s statement on the Iran decision: