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Briefing.com Summary:

*President Trump said serious discussions are taking place with a new and more reasonable regime in Iran.

*President Trump threatened stepped-up bombing action in Iran if a deal is not reached soon.

*Oil prices are headed higher, but Treasury yields are headed lower with growth concerns festering.

The global economy appears to be at a dangerous intersection this morning. The lights on the traffic signal are all working, but the malfunction is that they are all flashing at the same time.

The green light is President Trump indicating serious discussions are taking place with a new and more reasonable regime to end the military operations in Iran.

The red light is President Trump also saying that, "...if for any reason a deal is not shortly reached, which it probably will be, and if the Hormuz Strait is not immediately "Open for Business," we will conclude our lovely "stay" in Iran by blowing up and completely obliterating all of their Electric Generating Plants, Oil Wells and Kharg Island (and possibly all desalinization plants!), which we have purposefully not yet "touched." Other red lights are the Houthis getting involved in the war this weekend by firing missiles at Israel and press reports that the U.S. could be preparing for a ground operation in Iran.

The yellow light, which stands for caution, is flashing in the following ways:

• Oil prices are higher, not lower, despite talk of possible de-escalation in the Iran war. WTI crude futures are up 1.4% to $101.05/bbl and Brent crude futures are up 2.1% to $107.53/bbl.
• Treasury yields are headed lower this morning despite oil prices heading higher, suggesting a pivot from inflation worries to growth worries. The 2-yr note yield is down six basis points to 3.86%, while the 10-yr note yield is down seven basis points to 4.37%.
• High-yield spreads are still quite low historically but have widened approximately 50 basis points since their January low.
• The fed funds futures market shows a greater probability of a rate hike before the end of the year than another rate cut.
• NVIDIA (NVDA) has broken down below a nine-month trading range, and the semiconductor group as a whole has been weak.
• Outside of the energy sector, there is no leadership in the stock market. Losses this month for the other 11 sectors range from 4.0% to 11.6%.

Market participants, though, are taking their cue this morning from the green light. Currently, the S&P 500 futures are up 51 points and are trading 0.8% above fair value, the Nasdaq 100 futures are up 173 points and are trading 0.8% above fair value, and the Dow Jones Industrial Average futures are up 353 points and are trading 0.8% above fair value.

Who doesn't like the idea of the U.S. and Iran moving toward an off-ramp for this war? The question on everyone's mind is, how much damage will be done before the exit is finally taken? 

There is worry that the old and less reasonable regime in Iran is still calling the military shots, while the new and more reasonable regime, anonymous sources at this point, is doing the talking.

That is why the futures market isn't going parabolic, and it is why oil prices aren't sinking fast this morning. The bid we see in the equity futures market feels more reflexive, as in it is a speculative push from a short-term, oversold condition. It will have trouble lasting if the traffic signal doesn't make it clear that it is green-light go for ending this war on all sides.

--Patrick J. O'Hare, Briefing.com