In 30 seconds: Military conflict between the US and Iran has sent Brent crude and US gasoline prices surging to multi-year highs, with markets gyrating on war headlines and analysts warning of long-term economic destabilization. New data shows prediction markets like Polymarket are dominated by bots accounting for 75% of trading volume, with 0.1% of accounts capturing 67% of profits, and a majority of Americans viewing them as closer to gambling than investing. Analysts debate the Dollar Milkshake Theory—which holds that the US sucks global capital into its markets via USD strength—with critics arguing the thesis has been wrong since 2018 while proponents note US capital market size has doubled in that period. NY Fed President John Williams revised his 2025 inflation forecast up to 3% and pushed the return to 2% target out to 2027, while noting AI could push the neutral interest rate higher in a battle against demographic headwinds.
Brent crude settled at $113.83 on 2026-05-04, up 5.23% on the day, a move of $5.66 from the prior close of $108.17. Both the July and December Brent Crude Oil Futures Contracts are at new highs, with the December contract now signaling that the market expects crude oil to be above $90 for the next seven months. July Brent gyrated on every war headline over the last 24 hours — popping on reports that Iran hit a US warship, then pulling back after CENTCOM denied it. Trump claimed 2 US-flagged ships successfully exited the Strait. So the price of the world's most important commodity is now a function of which social media post you read most recently. At the pump, the average price for regular US gas hit $4.46 per gallon, the highest since July 2022, after surging almost 10% in just seven days. Some states are now witnessing record diesel prices. Meanwhile, the US SPR drawdown pace fell back below the 1 million barrels per day threshold last week, slowing from the prior week's pace. US gas prices up 50% over the last 9 weeks. The argument is that war disrupts the US ability to reshore fast enough, on multiple fronts — supply chain, labor, and economic. You do not need a geopolitical risk model to see the problem. You need a gas station receipt.
The pitch for prediction markets has always been that they are information machines: aggregate enough opinions, attach real money, and the price converges on truth. The reality, at least on bots-dominated platforms, looks more like a casino where the house is an algorithm. Automated wallets account for just 5% of all accounts on Polymarket but generate 75% of trading volume. Bots defined as wallets making more than 50 trades daily or making 1,000 total trades. So a small minority of tireless scripts is doing three quarters of the work, which is either a sign of deep liquidity provision or a sign that most human participants are supplying the other side of a very lopsided trade. The profit distribution confirms the suspicion. Just 0.1% of accounts capture 67% of profits on Polymarket. If you wanted to design a market structure that funnels money from casual participants to sophisticated operators, you would be hard pressed to improve on this. Meanwhile, a separate analysis of longshot bets, contracts priced below $0.35 on average, found that positions of at least $2,500 won at a 35% rate. The public, for its part, seems to have figured this out without a blockchain explorer. A poll from the American Institute for Boys and Men found that 61% of respondents view prediction markets as closer to gambling, while only 8% see them as investing. Another 32% said they were bad for society outright, with 34% calling them neutral.
Global capital sucked into US capital markets has doubled since 2018. If the USD maintains its post-1971 reserve status structure, the US will lose. He contends that war disrupts the US' ability to reshore fast enough, on multiple fronts — supply chain, labor, and economic. Meanwhile, the 30-year yield sits just 8 basis points from a new 18-year high. Gold settled at $4,524.00, down 2.29% on the day.
His updated forecast now puts inflation at 3% for this year, a nudge higher from the 2.75%-3% range he cited on April 16. The return to the Fed's 2% target, meanwhile, gets pushed out to 2027. That is not a typo. Two more years. The NY Fed President argued that AI could boost productivity and investment, which could raise the neutral rate of interest. Demographics are pulling the neutral rate down, while AI and productivity push it up. The message is: prices are stickier than hoped, the timeline to target is longer, and the structural neutral rate may be shifting.
Here is what your weekly spend looks like right now.
Gas (per gallon): $4.12, up 1.95% on the week
Eating out (CPI food away from home): 346.60, down 0.01% on the month