Overnight developments have once again altered the situation in the Middle East.
On the morning of the 10th local time, a branch of an Iraqi militia group announced that Iranian drones had flown over Iraqi airspace to launch attacks against American targets.
According to U.S. officials, the American military has already struck multiple Iranian air defense and radar systems around the Strait of Hormuz.
Iranian media reports indicate that several locations in the southern Hormozgan Province of Iran, including the Sirik area and Qeshm Island, have come under attack.
U.S. Central Command posted on social media on the 9th, stating that at 5:00 PM Eastern Time that day, U.S. forces conducted a "defensive" strike against Iran in response to Iran's downing of a U.S. Apache attack helicopter the previous day.
Former President Trump stated that Iran shot down the U.S. helicopter, vowing that the U.S. "must respond."
According to a report, Trump posted on social media on the 9th, saying that a U.S. Apache attack helicopter was shot down by Iran over the Strait of Hormuz on the evening of the 8th, and asserted that "America must respond to this attack."
Trump said: "I have just been informed that last night Iran shot down one of our very advanced Apache helicopters that was on patrol over the Strait of Hormuz. Both crew members are safe. Nevertheless, America must respond to this attack."
Earlier that day, U.S. Central Command issued a statement saying that at 7:33 PM Eastern Time on the 8th, a U.S. Apache attack helicopter crashed while patrolling near the coast of Oman. Both crew members were subsequently rescued, and the cause of the accident is under investigation.
On the 9th local time, Rezaei, spokesperson for the Iranian Parliament's National Security and Foreign Policy Committee, stated that Iran's armed forces have reached the highest level of combat and defensive readiness, and damage has been repaired. He also said that Iran's armed forces are prepared to confront any aggression at the highest level.
U.S. Vice President indicates a U.S.-Iran agreement could be reached within a week to several months.
According to a report on the 9th, U.S. Vice President Vance stated that the U.S. is "very close" to reaching an agreement with Iran that could provide a long-term solution to the Iranian nuclear issue.
Vance indicated that an agreement could be reached within the next week or could take several months, but it will "absolutely" be achieved before the November midterm elections. He said the U.S. "wants an agreement that serves U.S. economic interests while ensuring Iran cannot obtain nuclear weapons in the long term."
Israeli military chief states attacks on Iran are preparation for larger strikes.
According to a report, Israeli Defense Forces Chief of Staff Zamir said on the 9th that previous attacks on Iran were in preparation for "larger-scale, more powerful strikes," while the military will continue to intensify strikes against Lebanon's Hezbollah.
While observing an exercise in northern Israel that day, Zamir said the military is and will remain in a state of readiness to "resume combat against Iran at any time." The military has already conducted "swift and powerful strikes" against Iran, which are preparations for "larger-scale, more powerful" strikes.
Lebanon's Health Ministry issued a statement on the 9th saying that Israel's airstrikes on the city of Tyre in southern Lebanon's Tyre region that day have resulted in at least 8 deaths and 32 injuries.
The statement said that the Masakan neighborhood in Tyre was hit by Israeli airstrikes, and cleanup of the rubble is still ongoing.
According to an earlier report by Lebanon's Hezbollah-affiliated Al-Manar TV, Hezbollah issued a statement saying it thwarted an attempt by an Israeli armored unit to advance in the Tyre region, forcing it to retreat.
U.S. trade deficit shows slight decrease in April.
Data released by the U.S. Commerce Department on the 9th shows that the U.S. goods and services trade deficit in April was $55.9 billion, a month-on-month decrease of 1.2%.
The data shows that U.S. exports and imports of goods and services in April were $327.1 billion and $383.0 billion, respectively, representing month-on-month increases of 2.6% and 2%. For the month, the U.S. goods trade deficit decreased by $2.4 billion to $83.7 billion, while the services trade surplus decreased by $1.7 billion to $27.8 billion.
Wall Street is awaiting the upcoming release of the U.S. May CPI report, with market consensus expecting the year-on-year CPI increase may reach approximately 4.3%—which would be the highest level since 2023. The strong non-farm payroll data released last Friday triggered significant volatility in the U.S. stock market, with concerns that the upcoming CPI data could completely shatter expectations for a Federal Reserve rate cut within the year.
Faced with strong employment data and persistent inflation pressures, major Wall Street investment banks have withdrawn their forecasts for rate cuts in 2024.
According to the latest CME FedWatch Tool, the probability of the Fed maintaining unchanged rates in June is 98.2%, with a cumulative probability of a 25 basis point cut at 1.8%. The probability of unchanged rates in July is 85.8%, with a cumulative probability of a 25 basis point hike at 12.6% and a cumulative probability of a 25 basis point cut at 1.6%.
Simultaneously, clear signals of a rate hike are emerging from the Bank of Japan. On the 9th local time, according to news reports, the Bank of Japan plans to raise its benchmark interest rate from 0.75% to 1.0% at the monetary policy meeting scheduled for the 15th and 16th of this month, and intends to stop reducing its government bond purchase scale after April 2027.
The report stated that Bank of Japan Governor Ueda will propose the rate hike motion at the meeting on the 16th, which is expected to pass with majority support from the nine policy board members. Meanwhile, the plan to halt the reduction of government bond purchases has also gained support from a majority of the policy board members.
These measures signify the Bank of Japan's first adjustment to its policy rate since December of last year and are its latest signal in response to persistently high inflation pressures.
Over 160 oil tankers remain stranded in the Persian Gulf.
Citing a report from the British publication Lloyd's List on the 9th, more than 160 mainstream oil tankers have been stranded in Persian Gulf waters for over 100 days since the outbreak of regional conflict at the end of February. International Maritime Organization Secretary-General Dominguez warned that day that commercial interests should not put seafarers at risk by transiting the Strait of Hormuz.
Lloyd's List reported that although about a quarter of the oil tankers in the Persian Gulf have gradually departed since the initial stages of the conflict, the pace of departures has noticeably slowed recently. Security risks in the area near the Strait of Hormuz remain high, with most shipowners maintaining a highly cautious stance, unwilling to hastily arrange for vessels to pass through the relevant waters.
The Strait of Hormuz is one of the world's key energy transit corridors. Analysts point out that persistent security risks are affecting regional shipping activities and vessel operational decisions, with a large number of ships choosing to remain in relatively safe areas awaiting further clarity on the situation.
Multiple bearish factors converge, leading to a significant drop in oil prices. What's next for the market?
On the 9th, the price of the main SC2607 domestic crude oil futures contract fell sharply, as market bullish sentiment receded.
Chen Dong, a senior petrochemical researcher at Baocheng Futures Financial Research Institute, believes this sharp decline in oil prices was not due to a single factor but rather the result of a confluence of geopolitical risk premium unwinding, tightening macro policy expectations, weakening supply-demand margins, and capital flows. The entire energy and chemical sector faced pressure, with the market's trading focus shifting significantly lower.
"The cooling of geopolitical sentiment is the core trigger for this round of oil price weakness," Chen Dong stated. Previously, the tense Middle East situation led the market to price in a considerable supply risk premium, supporting oil prices to maintain a high range. Recently, expectations for U.S.-Iran negotiations have continued to improve, the pace of conflict has slowed, and the risk of shipping disruptions in the Strait of Hormuz has significantly decreased. The geopolitical premium that the market had previously priced in is rapidly unwinding, undermining the logic supporting high oil prices.
In Chen Dong's view, bearish macro factors further amplified the decline. The stronger-than-expected U.S. May non-farm payroll data significantly increased market expectations for a Fed rate hike in July and continued quantitative tightening, pushing the U.S. dollar index higher. A strong dollar suppressed risk appetite for global commodities, putting pressure on prices of commodities represented by crude oil. Foreign capital's willingness to allocate to long positions cooled, providing macro pressure for the oil price decline.
"Furthermore, the weakening supply-demand margin provided fundamental support for the decline," Chen Dong said. On the supply side, although OPEC+ production cut policies continue to be implemented, the market is gradually pricing in expectations for a relaxation of the third-quarter production cut policy and the subsequent release of supply increments. Meanwhile, U.S. crude oil production remains high. Overall, there is no substantial shortage in global crude oil supply. On the demand side, it is a seasonally weak period, with domestic refined oil products entering the traditional off-season for consumption. Coupled with weak manufacturing sentiment in Europe and the U.S., terminal oil demand recovery is sluggish and cannot sustain high oil prices.
Additionally, Chen Dong mentioned that the prolonged high-range consolidation of oil prices had accumulated a large number of profitable long positions. With the concentrated release of multiple bearish factors, profit-taking triggered short-term technical selling, significantly amplifying intraday losses.
Yang An, head of energy and chemical research at Haitong Futures, stated that besides the cooling of geopolitical tensions, weak demand is becoming a new variable dragging down oil prices. Saudi Aramco has lowered its price for Arab Light crude bound for Asia next month by $6 per barrel, which indirectly confirms the weakness of Asian demand.
Notably, Yang An also pointed out a structural change: high oil prices are accelerating the substitution by new energy sources. In China, the sales share of new energy vehicles has exceeded 60% for two consecutive months, while the suppression of refined oil demand by high oil prices has also exceeded expectations. These changes on the demand side have also become important factors suppressing oil prices, largely alleviating anxiety caused by the continued decline in global crude oil inventories.
Looking ahead, Chen Dong believes the short-term crude oil market has entered a phase of valuation adjustment. With the confluence of three bearish factors—geopolitical, macro, and supply-demand—the weak trend in oil prices may continue. Later, it will be crucial to closely monitor potential flare-ups in the Middle East situation, the pace of Fed policy implementation, and the recovery of summer oil demand.
Yang An stated that the current situation facing the crude oil market is relatively complex: on one hand, the U.S.-Iran negotiations around a memorandum of understanding have been back and forth without substantial progress; on the other hand, the specific navigation situation in the Strait of Hormuz needs further clarification.
"Overall, as oil prices have already fallen to around $90 per barrel, the room for further sharp declines in the short term is relatively limited," Yang An believes. If U.S.-Iran negotiations do not proceed smoothly, oil prices still have a relatively high probability of rebounding. Furthermore, the continued decline in global crude oil inventories is a certain direction. Although demand is suppressed by high oil prices, it is entering the traditional peak consumption season, and its performance still requires further observation.
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