Oil

Japan holds 254 days of oil in reserve. That number has been repeated so often since 28 February that it has become a kind of talisman, proof that the country can absorb anything the Strait of Hormuz throws at it. It is also misleading. On 16 March, Prime Minister Takaichi ordered the largest oil reserve release in Japanese history: 80 million barrels, equivalent to 45 days of domestic consumption. The draw came from both private and government stockpiles and was coordinated with a 400-million-barrel IEA-wide release across 32 member nations. Japan’s contribution was the second largest after the United States. ...

In a long-form interview from the Treasury’s Cash Room on 13 March, a week before the worst single-session bond selloff of his tenure, Bessent compared himself to a lifeguard. Drowning people pull you under, he told the interviewer. Your goal is always to save them. For fourteen months he has had solid ground. When JGB yields spiked in January on fiscal fears around the Takaichi snap election, he called Tokyo and the stress faded within days. When the carry trade wobbled in January, a Fed rate check on dollar-yen was enough. Those problems originated in places he could reach. ...

On Thursday Scott Bessent told Fox Business that the administration might “unsanction the Iranian oil that’s on the water.” One hundred and forty million barrels sitting in tankers at sea would be allowed to enter the open market. Buyers in Japan, India, Singapore and Malaysia could purchase the crude without fear of secondary sanctions. The proceeds would flow back to whoever holds title to the cargo. He offered no mechanism for confiscating revenues. No escrow. No condition excluding Iranian entities from the sale. “We’re not intervening in the financial markets,” he said. “We are supplying the physical markets.” ...

Japan has the one capability the Hormuz coalition lacks most. The legal architecture exists. The existential case is overwhelming. The only variable is political will.

Powell leaves on 15 May. Warsh may not be confirmed in time. The Iran war has ensured this transition will be anything but orderly.

The 1970s parallel for a gold crash requires a Volcker. There is no Volcker in 2026.

On Monday, financial containment appeared to be winning. The Nikkei rallied 2.88%. Oil, which had touched $119 on Brent, collapsed to the high $80s after Trump told CBS News that the war was “very complete, pretty much”. By Wednesday the IEA had announced the largest coordinated oil reserve release in its history: 400 million barrels from 32 member nations. The US contributed 172 million barrels from the SPR. Japan committed 80 million barrels, its first solo reserve release since 1978. Bessent unsanctioned Russian crude stranded on the water, creating additional supply at the stroke of a pen. G7 energy ministers convened in Paris. Trump declared victory. ...

Two days ago, this blog argued that Bessent held the line but the line was thinner. On Tuesday, Iran began laying mines in the Strait of Hormuz. On Wednesday, the IEA announced the largest emergency oil release in its history: 400 million barrels. Brent crude barely flinched, settling around $93. The containment failed. Not because Bessent’s tools were wrong, but because mines changed the physics of the problem. Why mines changed everything The market had been pricing a scenario: Hormuz reopens when the shooting stops. Trump says the war is “very complete.” Escorts arrive. Tankers resume. Oil falls. That was the trade on Monday, when the Nikkei bounced 2.88% and Brent dropped from $119 to $88. ...

The Bank of Japan’s policy board meets on 18 March–19 with the overnight rate at 0.75%, the highest in thirty years. The market expects a hold. The decision itself is not the story. The language is. Two forces are pulling in opposite directions, and the words the BOJ chooses to describe the balance between them will determine whether April remains a live meeting or whether the next hike slips to June or beyond. ...

Ten days ago, Brent crude was $66. On Monday it touched $119.50 before settling around $93. The Nikkei 225 fell 5.2% on Monday. USD/JPY hit 159.14, one tick from what traders regard as the Ministry of Finance intervention threshold. The UST 10-year yield briefly breached 4.21% before pulling back to 4.13%. And yet the financial system did not crack. This article examines what Scott Bessent spent to keep it that way, what it reveals about the yen’s role in a crisis and why his binding constraint (the 10-year yield) is tighter now than it was before the first missile was launched. ...