Where’s The Limit

By Stefan Koopman, senior market strategist at Rabobank

The ancient Greeks left a rich intellectual legacy, as our global strategist Michael Every showed last week in

Every time an Iran deal is close, it moves away again. I’d described this crisis as a polytropos Odyssey, but it also matches Zeno’s Achilles & the paradox – ever closer but never reached.

(Sorry, the pun was irresistible!) https://t.co/tY8moivdXn

— Michael Every (@TheMichaelEvery) June 1, 2026

The past 24 hours indeed showed how fragile this equilibrium is. Iran’s IRGC‑linked Tasnim agency reported that Iranian negotiators would halt talks with the US in response to Israeli attacks in Lebanon against Hezbollah. It also warned that the “resistance front” could be activated, including potential Houthi involvement in the Bab al‑Mandeb Strait. Oil prices jumped 7%, the dollar strengthened, and equity futures turned red. Within hours, however, Trump said he had spoken to both Hezbollah and Netanyahu (all while saying he “really doesn’t care” if talks collapse) and claimed that Israel and Hezbollah would stand down. He also added that talks with Iran were proceeding at a “rapid pace”, a line we have now heard for weeks.

Oil prices quickly reversed, but scepticism is warranted. Trump again appears to negotiate with himself. He claims progress while trying to contain escalation on fronts he does not control. From Tehran’s perspective, that urgency weakens the US position. Why offer concessions that fall short of core strategic interests if they believe they can roll the US president a bit further? The past day suggests Iran does not see itself as the side under decisive pressure. It appears to believe that the US and its partners have at least as much at stake in avoiding further instability. In that setting, President Trump does not seem to hold the stronger hand. And while Zeno’s runner never arrives, the real world does have real limits, and we are moving steadily closer to physical supply hitting effective tank bottom.

It cannot be stressed enough: the longer this drags on, the bigger the problems become. The PMIs made that clear yesterday. The US manufacturing ISM rose to 54, its highest level in four years, but that headline is deceptive. Much of the strength reflects companies bringing forward orders and activity to build inventories and protect against supply chain disruptions. That boost is likely to prove temporary but inflationary.

The details of the euro area manufacturing PMI, which printed at 51.6, are equally unconvincing. The survey shows costs rose at the fastest pace in four years, driven by higher energy and raw material prices, while more frequent supply chain delays added further upward pressure..

Higher prices for inputs, packaging and logistics will push up euro area goods inflation in the months ahead. But as factories pass these higher costs on to customers, they face weaker demand than in the immediate post‑pandemic period, when the previous supply shock hit the economy. The PMI suggests that order books are already starting to stall after an initial boost from front‑loading and precautionary bookings. This points to a clear trade‑off. The ECB will raise rates next week to signal vigilance, but it will also need to stay cautious about how far it goes as demand starts to weaken.

The ECB’s consumer expectations survey showed a slight easing in April. Consumers expect prices to rise by 2.9% a year over the next three years, down from 3.0% in March. One modestly positive signal for the ECB is that the distribution around this three‑year expectation has normalised somewhat. Last week, Schnabel warned that a rightward shift in inflation expectations could signal de‑anchoring risks that “must be monitored carefully.” Expectations for the next 12 months stayed at 4%, while five‑year expectations held at 2.4%, still above the ECB’s 2% medium‑term target.