President Donald Trump has launched a blistering attack on his own party after the House of Representatives passed a resolution rebuking his Iran policy, calling the move 'unpatriotic' in a late-night tweet. The resolution, which passed 224 to 194 largely along party lines, demands that the administration seek congressional approval before any further military action against Iran. Eight Republicans crossed the aisle to support the measure, a rare display of defiance against a president who has consistently demanded loyalty from his party.
For a man who prides himself on disrupting the Washington establishment, this is a sharp reminder that even his political capital has limits. The market reaction was muted, with gilt yields holding steady and the FTSE 100 barely blinking. But make no mistake: this is a tremor, not a quake. The real fault lines lie in the bond market, where investors are pricing in a 30% chance of a recession within the next 12 months. A protracted conflict with Iran would be the catalyst that sends yields tumbling and gold soaring.
The resolution is a political hedge. It allows Republicans to pay lip service to oversight while preserving the president's ability to act. But the underlying message is clear: the party is nervous about the electoral consequences of a war without end. The 2020 election is the ultimate referendum on Trump's first term, and the spectre of another Middle Eastern quagmire is a liability his handlers cannot afford.
This is where the fiscal reality bites. Any sustained military engagement would blow a hole in an already bloated budget deficit. The Congressional Budget Office projects a $1 trillion deficit for 2020, and that was before any escalation. The bond vigilantes are watching. They always do. If the dollar weakens further, we could see a capital flight from US Treasuries that would make the taper tantrum of 2013 look like a picnic.
The president's response is pure Trump: doubling down on his base, accusing his critics of treason, and ignoring the growing unease within his own ranks. But the markets are not swayed by rhetoric. They demand action, or at least credible inaction. The administration's messaging on Iran has been chaotic at best, oscillating between threats of 'obliteration' and offers of talks. This inconsistency is poison to investor confidence.
What we are witnessing is a slow motion car crash of fiscal responsibility. The tax cuts were supposed to pay for themselves. They didn't. The tariffs were supposed to reduce the trade deficit. They didn't. Now the president wants to add a military confrontation to the mix, all while the Federal Reserve is struggling to keep the plates spinning.
The irony is palpable: a president who ran on 'America First' has delivered a weaker dollar, a wider deficit, and now a potential war. The House rebuke is a symbolic slap on the wrist, but it is also a warning shot from the markets. If the administration continues down this path, the real vote of no confidence will come from the bond traders.
For now, the yield on the 10-year Treasury remains stubbornly below 2%, a clear signal that the market sees deflation as a bigger risk than inflation. That could change overnight if oil prices spike. The Strait of Hormuz is the chokepoint of the global economy, and the administration is playing with matches near a petrol station.
This is not a moment for triumphalism or despair. It is a moment for sober analysis. The House has drawn a line in the sand. The question is whether the president will cross it. The markets are waiting. They always do.
