Iran peace diplomacy is alive but fragile, Trump is talking about taking Kharg Island and securing Iranian uranium, Yemen has entered the picture, and Asian equities sold off sharply overnight. The macro focus this week is squarely on the Iran resolution path, an under-the-radar inflation expectations beat, and a compelling global macro trade: short Gilts, short Sterling.
Geopolitics: The Iran “Taco Trade”
Where Things Stand
Significant diplomatic activity over the weekend. Pakistan has offered to host peace talks between Iran and the US, with Saudi Arabia, Turkey, and Egypt all attending or represented. Trump is publicly saying he is “getting close to a deal.” Iran has responded with a 5–6 point counter to the US’s 15-point plan. However, simultaneously, Trump is talking about seizing Kharg Island and securing Iranian oil — and there are widespread rumours of US special forces and the 82nd Airborne being positioned to secure uranium assets inside Iran.
| Actor | Action / Position | Risk Assessment |
|---|---|---|
| Pakistan | Offering to host US–Iran talks (direct or indirect) | Positive diplomatic signal |
| Saudi Arabia / Turkey / Egypt | Weekend consultations attended | Regional backing for de-escalation |
| Trump | “Close to a deal” but also eyeing Kharg Island & Iranian oil | Mixed — unpredictable |
| Iran | 5–6 point response to US 15-point plan | Dialogue open; not capitulating |
| Yemen | Now involved — Suez Canal & straits risk | New escalation vector |
| US forces | Rumoured SF / 82nd Airborne in region | Elevated military optionality |
Hilbert’s Base Case: This Fizzles Out
Despite the noise, Hilbert’s core view is that this ends as a “taco trade” — lots of bluster, ultimatums, and positioning, but ultimately a deal or de-escalation rather than boots on the ground. The US is not going to mount a meaningful ground invasion with a million Iranian soldiers defending their territory and surface-level regime support holding. That said, Yemen’s involvement is a new and unpredictable variable that could complicate Suez and Hormuz shipping.
I think this is going to end up being a huge taco trade. With a million Iranian soldiers in Iran and support for the regime still holding strong on the surface, they’re not going to put boots on the ground in any meaningful way. It’ll probably hopefully fizzle out, but who knows.
Macro: Last Week’s Data & Key Signals
PMI - A Wash
Manufacturing PMI beat expectations; Services PMI was a miss. The net read is roughly neutral — no strong directional signal for growth. The split between manufacturing (supported by restocking / defence/energy capex) and services (squeezed by consumer caution and oil costs) is consistent with Hilbert’s view that high oil is already beginning to bite on growth.
UK CPI - Retail Ticked Up, Headline In-Line
UK retail CPI edged higher. Headline CPI came in bang in line with expectations. However, this data point feeds directly into the Sterling crisis thesis: the UK is carrying a large debt funding burden while inflation risks remain sticky, and Starmer’s government has limited fiscal room to manoeuvre. Hilbert’s structural trade here is clear.
The Under-The-Radar Number: Inflation Expectations
The most significant data point of the week — one largely ignored by consensus but closely watched by us (and by the Fed): US inflation expectations came in at 3.8% vs 3.4% expected. This is a meaningful beat. The Fed explicitly monitors this series, and a further rise in long-run inflation expectations would complicate the case for rate cuts even if Warsh’s structural disinflationary thesis is correct.
Fed Funds Futures — Repriced, but Less Extreme Than Last Week
| Scenario | This Week | Last Week | Change |
|---|---|---|---|
| April meeting — hold | 96% | 85% | More hold priced |
| April meeting — hike | 3–4% | 15% | Hike risk eased |
| December — no change | 79% | — | Base case |
| December — hike | 13% | ~48% | Significant de-escalation |
| December — cut | 7% | — | Cuts almost off the table |
The rate hike hysteria of last week (when a 15% chance of an April hike was priced) has partially unwound. April is now pricing 96% hold. December is now pricing mostly no change, with a residual 13% hike probability and only 7% for a cut — a dramatically different picture from February when multiple cuts were firmly priced in.
Hilbert’s Favourite Trade: Short Gilts, Short Sterling
The Sterling Crisis Thesis
This is Russell Thompson’s highest-conviction global macro trade right now. The thesis: the UK faces a compound problem of sticky inflation (retail CPI ticking up), a large and growing debt-funding challenge, a weak growth backdrop, and a government (Starmer) with limited political capital and fiscal flexibility. The last thing the UK needs is an oil-driven inflation spike, and yet that is exactly what is occurring.
Short Gilts: UK debt funding burden is large; higher inflation = higher yields required; supply/demand imbalance in UK bond market Short Sterling: Stagflationary dynamic developing; BoE caught between growth support and inflation; capital flows under pressure
- Political risk: Starmer’s government under pressure; fiscal credibility a key watchpoint
- Hilbert’s view: “There’s a Sterling crisis coming in the UK. The last thing they want now is higher inflation on top of everything
- else with a huge debt funding issue. Starmer’s in trouble. Short Gilts and short Sterling is my favourite global macro trade right
- now. ” — Russell Thompson
Crypto & Digital Assets
This week’s call was macro-heavy given the Iran situation and month-end dynamics. The broader backdrop, conservative risk positioning, elevated geopolitical uncertainty, and rate expectations that are now firmly “no cut” for most of 2026, keeps the environment cautious for risk assets including Bitcoin.
Event Risk & Upcoming Calendar
| Date | Event | Notes |
|---|---|---|
| This week | US–Iran peace talks (Pakistan) | Saudi / Turkey / Egypt attending; outcome highly uncertain |
| This week | Yemen / Suez developments | New escalation vector; watch shipping disruption |
| Next 4 weeks | April FOMC meeting | 96% hold; watch rate path language under Warsh |
| Coming | Warsh confirmation | Congressional process ongoing |
| Coming | SLR reform announcement | Bessent-flagged structural BTC/risk bullish |
Outlook
The Iran situation remains the dominant variable for all risk assets - a negotiated resolution, even a messy one, would be the biggest single catalyst for a Bitcoin and risk asset recovery. The structural Hilbert macro thesis (rate cuts, SLR reform, TGA drawdown) remains intact but is on hold while geopolitical uncertainty persists. The short Gilts / short Sterling trade is the cleanest expression of the current environment outside of crypto.
Inflation expectations at 3.8% deserve more attention than markets are giving them. If this series continues to drift higher through Q2, it will complicate the Fed’s ability to respond to any growth slowdown with cuts - exactly the stagflationary scenario that is worst for equities and most complex for Bitcoin.
