US stock markets are showing incredible resilience, even as the US starts squeezing off the only traffic hauling oil through the Strait of Hormuz. The blockade went into effect at 10 am ET.
The market is sensing this is all theatre in the lead up to some kind of deal where Iran gives up nuclear for a peace deal and the removal of sanctions. Obviously, the risk is that’s overpriced and everything will fall apart.
The bet seems to be that Trump doesn’t want this war to continue any longer, and nor does anyone else. At the same time, the world may be underestimating how willing Iran is to continue fighting.
The S&P 500 is less than 200 points from pre-war levels.
The price action isn’t just limited to stock markets. US Treasury yields are now slightly lower on the day, with 2s at 3.795% from a high of 3.849% shortly after the open.
In FX, the US dollar gapped higher at the open but it’s slowly losing those gains. Cable is now flat on the day at 1.3455 from a low of 1.3382.
Oil is the clearest view on the direction of travel in markets as WTI is down to $101.37 from a high of $105.63
