Project Freedom lasted 36 hours.
Sunday evening: Trump launched it with 15,000 troops, 100+ aircraft, and guided-missile destroyers. Monday: two ships got through, Iran fired cruise missiles at US destroyers, attacked the UAE with 19 projectiles, and set fire to the Fujairah oil terminal. The US sank six to eight Iranian boats. Tuesday evening: Trump paused it, citing "Great Progress" toward a "Complete and Final Agreement" with Iran.
Oil crashed by over 8%. Gold surged nearly 3%. The market is pricing a breakthrough.
I think the market is wrong. Again. Just like it was in the case of the previous TACO rallies.
Technically, nothing really changed.
The USD Index reversed from its recent lows. Nothing changed from the technical point of view.
The current bottom remains similar to what we saw last April. The current pattern is shorter, so if this similarity is to continue, we might expect a few more days of back-and-forth movement or slower rallies, and then a much more profound rally. It’s not my official forecast, though. My official forecast is getting a big rally once the USD Index successfully verifies its breakout above 100. And I think we won’t have to wait much longer for it to happen (weeks, not months).
Gold corrected about half of its April decline, and its 61.8% Fibonacci retracement is just ahead.
The fundamental picture (see below) suggests that today’s rally is temporary. Technicals don’t point to anything else.
The TACO Pattern at Its Purest
This is one of the fastest escalate-and-retreat cycle of the entire war. The April 17 Strait "reopening" lasted 18 hours before the IRGC reversed it. The April 21 ceasefire extension came after Trump said extension was "highly unlikely." The May 1 oil crash came on "Iran responded to amendments" before Trump called the proposal "not acceptable" days later.
Each time, the market rallied on optimism. Each time, the structural reality reasserted itself within days.
Today's trigger is Trump pausing Project Freedom and claiming "great progress." But read the fine print. The blockade remains. Trump was explicit: "the Blockade will remain in full force and effect." The Strait remains under Iranian control. Iran's 14-point proposal was "not acceptable" four days ago. Iran still insists on "no nuclear negotiations at this stage." The Supreme Leader is unreachable. Messages are being "carried by hand to caves," per a US official.
A US official gave the most honest assessment to Time magazine: "It's either we're looking at the real contours of an achievable deal soon, or he's going to bomb the hell out of them." That's not "great progress."
China Won't Deliver Iran for Free
Araghchi met Wang Yi in Beijing today. This is being framed as China pressuring Iran to open the Strait. Rubio said publicly: "I hope the Chinese tell him what he needs to be told."
I think this framing misreads China's actual incentives.
Consider Beijing's position. The US is bogged down in a war with 34% approval and $4.46 gas. Every week, the conflict continuously weakens Washington politically and economically. A distracted US is less capable of pressuring China on Taiwan, the South China Sea, or trade. From Beijing's perspective, the war is not a problem to solve. It's a leverage to use.
Trump arrives in Beijing on May 14, needing China's help with Iran. That's the strongest negotiating position Xi has had in years. He's not going to spend that capital pressuring his own ally to help his rival for nothing. The more likely play: "You want help with Iran? Let's talk about tariffs. Let's talk about Taiwan. Let's talk about Huawei."
Wang Yi's public statement confirms this. He called for a "comprehensive ceasefire" and "prompt resumption of shipping." That language doesn't blame Iran. It puts equal pressure on both sides. That's not pressuring Iran to open the Strait. That's telling the US to stop the war.
A Beijing-affiliated think tank told CNBC directly: China "lacked both the capability and inclination to pressure either side."
China is still importing over a million barrels per day of Iranian crude through pre-positioned floating storage in Asia, unaffected by the blockade. China doesn't need the Strait open urgently. It's absorbing the shock better than Europe, Japan, or South Korea. And every day the war drags on, China's relative position strengthens.
The market is pricing the Beijing diplomatic track as bullish for peace. I think it's more likely to produce a US-China trade discussion with Iran as a side topic, not a breakthrough that reopens the Strait. Trump will claim "great progress" from Beijing. He claims that about everything. The structural impasse remains: Trump wants nuclear concessions, Iran won't discuss nukes, and China won't pressure Iran without getting something massive in return.
Nothing Has Changed
Let me re-state this plainly. The Strait is closed. The blockade is in effect. Iran's parliament is drafting permanent Strait control legislation. Mine clearance takes six months. 170 million barrels remain trapped in the Gulf. Kuwait is under force majeure. Insurance companies classify the Strait as a war zone. Shipping companies won't send vessels into waters where cruise missiles were fired 48 hours ago.
Project Freedom proved the Strait can't be reopened by military force. Two ships got through on Day 1 at the cost of a naval battle. That's not a solution. That's a demonstration of the problem.
Today's oil crash and gold rally are the channel operating in reverse on deal optimism. We've seen this on April 17, April 22, April 30, and May 1. Each time, the reversal was temporary. Each time, the structural picture reasserted within days.
The trends in precious metals and non-energy commodities remain down. Gold's bounce today, while significant in dollar terms, keeps it well below $4,800, the level it broke below two weeks ago. Silver's nearly 5% surge fits the pattern I've described in recent Gold Trading Alerts: sharp bounces within a declining trend, often coinciding with deal-related oil selloffs that reverse once reality sets in.
The Beijing summit creates a 9-day window (until May 15) where Trump is unlikely to escalate. That may extend the corrective bounce for a few more sessions. But unless someone's position actually breaks (Trump drops the nuclear demand, or Iran opens the Strait without conditions), the impasse continues, and the channel reasserts.
Neither side has shown any willingness to concede its core position. I don't think a week of diplomacy in Beijing changes that.
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Thank you.
Sincerely,
Przemyslaw K. Radomski, CFA