Brent crude oil futures, the international benchmark, and West Texas Intermediate (WTI) crude futures, the North American pricing benchmark, both rose sharply during early Monday Asian trading. The U.S. dollar strengthened, while S&P 500 index futures opened significantly lower in Asia. This latest geopolitical development extends the de facto dual U.S.-Iran blockade of the Strait of Hormuz, a critical chokepoint for the global energy system. This could lead to further increases in international oil prices. Coupled with momentum trading indicators reaching extreme levels that have historically foreshadowed sharp short-term sell-offs, these factors may together push global stock markets, which have rallied strongly recently amid an AI investment frenzy, toward a correction trajectory. Brent crude futures surged violently by up to 3.5%, reaching the key bullish level of $105 per barrel, while U.S. West Texas Intermediate crude (WTI futures) climbed towards the $100 per barrel mark.
In a recent social media post, U.S. President Donald Trump stated that Iran's response to his long-term peace proposal aimed at ending the Middle East war was "completely unacceptable." Concurrently, following a series of escalating hostilities, both sides are struggling to maintain a fragile temporary ceasefire agreement, maintaining an unspoken understanding in the Strait of Hormuz to "control the strait with military forces while avoiding direct confrontation as much as possible." Since the Iran war began in late February, the Strait of Hormuz has been effectively blockaded, severing one of the most critical shipping lanes for supplying crude oil, natural gas, and refined fuel oil to global customers. This has significantly driven up energy prices and exacerbated inflation concerns among global investors. The International Energy Agency stated that the supply disruption in the Strait of Hormuz caused by this geopolitical conflict is creating the largest supply-side shock in human history.
Wall Street financial giant Citigroup released a research report stating that if long-term peace negotiations between the U.S. and Iran remain difficult, leading to a prolonged blockade and control of the Strait of Hormuz, the international oil price benchmark—Brent crude—could rise further from its recent pullback near $100, potentially even setting new阶段性 highs. Citi's strategists indicated that their base case scenario still expects a significant easing of the Strait of Hormuz disruption by the end of May but added that the difficulty in reaching a U.S.-Iran agreement has increased near-term upside risks for oil prices. The Wall Street giant maintains a 0-3 month Brent price forecast at a high level of $120 per barrel; it also expects the average Brent price to fall back to $110 per barrel in Q2, then to $95 in Q3, and $80 in Q4.
From Ceasefire Illusion to New Supply Shock! Trump's "Completely Unacceptable" Remark Reignites Oil Market
The geopolitical conflict that erupted on February 28 has severely disrupted the global energy supply market. Shipping through the Strait of Hormuz, which accounts for about 20% to 30% of global oil and gas transportation, has nearly completely stalled, causing supply tightness and大幅推高ing oil prices. This drove the Q1 international oil price benchmark—Brent crude futures—to surge over 50%, hovering around $100 per barrel. Subsequently, catalyzed by occasional signals from both sides for further peace talks, prices once retreated to around $90. However, as of recently, with the Strait of Hormuz still under extremely strict military control and blockade by both sides and the prospects for a long-term peace agreement becoming increasingly模糊, prices have once again broken through the $100关口.
As shown in the chart above, oil prices surged after Trump rejected Iran's peace proposal—the U.S. President called Iran's response "unacceptable." Media reports over the weekend suggested Iran had proposed transferring part of its high-enriched uranium stockpile to a third country but refused the idea of dismantling its largest nuclear facility. However, shortly after, according to Iran's semi-official news agency Tasnim, Iran disputed the aforementioned media reports. On Sunday, a密集 drone attack briefly ignited a large cargo ship in the Persian Gulf near Qatar, the latest notable shipping attack in the region since the U.S. and Iran reached a temporary ceasefire agreement in early April. The United Arab Emirates (UAE) and Kuwait also stated they had intercepted several waves of hostile drone attacks but did not disclose which military force launched them.
Saudi Aramco CEO Amin Nasser said on Sunday that if the restricted shipping conditions through the Strait of Hormuz persist for more than a few weeks, the oil supply market might not normalize until 2027. The company has managed to redirect some oil flows through its Yanbu port on the west coast to offset supply losses, but this is very small compared to normal运输 through the Strait of Hormuz. Aramco CEO Amin Nasser warned that the market has already lost about 1 billion barrels of oil over the past two months due to disruptions in Hormuz shipping. Even if passage resumes, low inventories, years of underinvestment, and logistics重建 would slow the normalization of the oil market. Aramco's warning essentially re-prices the market: "Reopening the strait" does not equal "immediate supply恢复." If the blockade lasts only a short time, the market would still need months to消化 the inventory gap, shipping schedule mismatches, insurance costs, and refinery restocking; if it drags on for several more weeks, the supply-demand gap could extend跨年, potentially keeping the market from normalizing until 2027.
As described in Citi's latest report, Wall Street strategists appear increasingly convinced that shipping through the Strait of Hormuz will remain impaired into the second half of this year. A majority of institutional investors surveyed by Goldman Sachs expect shipping traffic through this narrow waterway to remain disrupted beyond the end of June. Although a small amount of shipping supply has successfully passed through the Strait of Hormuz at the risk of missile attacks—for instance, the UAE and Saudi Arabia have quietly sailed out several tankers—the total flow remains only a fraction of pre-war levels. Qatar has also successfully shipped out several vessels carrying large-scale liquefied natural gas (LNG) cargoes, the first LNG carriers to pass through the strait since the geopolitical conflict began in late February.
Israeli Prime Minister Benjamin Netanyahu warned in an interview on CBS's *60 Minutes* on Sunday that the war "is not over yet." He stated more work is needed to completely dismantle Iran's nuclear capabilities and清除 its high-enriched uranium stockpile. Trump's latest threatening remarks triggered massive trading as Asian financial markets opened this week, with over 4,000 contracts of Brent crude July futures traded in the first five minutes. In contrast, the average trading volume in the first few minutes of recent Asian market trading days was even less than 1,000 contracts.
"TACO" Fading, "NACHO" Emerging?
In the view of some Wall Street strategists, the Hormuz crisis has escalated from a "short-term geopolitical shock" to a "global energy system repair cycle issue." This means the risk premium in oil prices remains sticky; the market cannot just trade on "ceasefire headlines" but must trade on inventory drawdowns, shipping insurance, alternative通道 capacity, and restocking cycles. Brent's return to around $105 per barrel reflects investors beginning to accept that high oil prices may become常态化. This will continue to constrain the Federal Reserve's room for interest rate cuts, boost the relative attractiveness of large energy stocks, oil services, shipping insurance, and U.S. shale, while putting pressure on airlines, chemicals, consumer sectors, and some unprofitable, interest-rate-sensitive high-valuation growth stocks. In other words, even if the Strait of Hormuz reopens tomorrow, the global oil market supply side is not a "one-click restart." If the blockade continues to drag on, the energy shock could evolve from price volatility into a macro inflation and supply chain re-pricing theme for 2026-2027.
Since Trump launched a global trade war in April 2025, the "TACO" strategy (Trump Always Chickens Out) has been widely adopted by traders. Whenever Trump issued new, more aggressive tariff threats or other major threats causing market plunges, global stock and bond market investors would bet that he would ultimately back down or that implemented policies would be significantly weaker than his verbal threats, choosing to buy the dip heavily at opportune低迷 moments, betting heavily on a major market rebound soon after. However, as the stock market's most classic momentum trading strategy—which uses various technical indicators or institutionally customized quantitative models to buy winners and sell losers on a large scale—has reached extreme levels that have historically多次预示 short-term剧烈抛售, it means the AI-driven global stock market bull run基调 and main trend, while not yet disproven, may at the短线 level be about to shift from an "earnings upgrade rally" to a "momentum trading overheating-driven correction phase."
Currently, more traders are leaning towards betting on the "NACHO" trading theme. As the Hormuz crisis cannot be quickly resolved, Wall Street traders appear to be switching from the "TACO" trading strategy (betting on further positive progress in U.S.-Iran talks or that Trump always chickens out) to the "NACHO" strategy—assuming long-term strait blockade is inevitable (Not A Chance Hormuz Opens). Although Brent crude prices have retreated from the wartime high of $126 per barrel in late April, they remain above $100. Citi stated that even if the Strait of Hormuz is解除封锁 in an orderly manner, global oil supply will remain very limited in the short to medium term, likely far from恢复 to pre-conflict late-February transportation levels. During this period, global抢购 from Middle Eastern countries or囤积 due to inventory恐慌 could大幅推高 oil prices.
Overall石油产量 in the Middle East has seen a大幅削减 due to the Iran war. This time, the logic behind the产量缩减 and油价暴涨 is not just "Strait of Hormuz运输受阻" but a triple叠加 of "output cuts + export vessel capacity受阻 + infrastructure damaged by missile strikes." These factors are also why veteran Wall Street strategists like Ed Yardeni, founder of investment advisory firm Yardeni Research, recently emphasized that energy stocks are upgrading from cyclical trades to strategic overweight positions in portfolios, given the global economy is already承受ing high financing costs and geopolitical shocks.
As momentum-obsessed traders struggle to find ceasefire clues in the Iran war, are global markets shifting from a momentum frenzy back to a geopolitical risk mode? Historical data statistics show that increasingly extreme momentum trading暗示 that the AI investment frenzy-driven bull market in U.S. and global stocks has entered a late-stage狂热 phase of "overheating/congestion/high fragility." However, it more accurately预示 a阶段性 downward correction or increased risk of剧烈轮动 in the market, not necessarily the end of the bull market. Particularly, the classic combination of inflation concerns, extreme momentum trading, and high stock market valuations typically means the market has overpriced expectations for fundamental expansion—when fundamental data or the macro environment significantly deviate from expectations (e.g., earnings downgrades, major changes in interest rate expectations, rising financing costs around the yield curve), the bull market is more prone to阶段性回调.
After Trump rejected the latest peace proposal, investors betting on the hot market momentum rally may face a严峻 reality check as Asian markets resumed trading. Trump stated that Iran's latest response to his proposal to end the 10-week-long conflict with the U.S. was "completely unacceptable." As market concerns about inflation and even "stagflation" rapidly升温, Brent and WTI crude surged in early Asian trading, and the U.S. dollar strengthened significantly against major currencies.
Senior strategist Jason Wong from Bank of New Zealand stated: "Trump's rejection of Iran's latest peace plan could set financial markets up for a 'risk-off' trading mode to start the week, reversing some of the price moves we saw last week. This move could extend into early trading."
Trump proposed that Iran orderly allow ships through the Strait of Hormuz, while Washington would end its blockade of Iranian ports next month. However, this proposal似乎 was not fully accepted by Iran, and both sides are still firing warning shots at some vessels attempting to pass through the strait.
Global stock markets rallied strongly last week, with the S&P 500 and Nasdaq 100 indices continuing to set new records. The yield on the 10-year U.S. Treasury note rose, and cryptocurrencies also gained. Robust U.S. employment data, coupled with a string of strong corporate earnings, reinforced market speculation that the world's largest economy remains resilient in the face of energy pressure from the Iran war. As of the close on Friday, strong employment data and the trading frenzy around the AI computing power theme jointly pushed the S&P 500 and Nasdaq 100 indices to new all-time highs on Friday, with the S&P 500 posting its sixth consecutive weekly gain. The Philadelphia Semiconductor Index, a global bellwether for chip stocks and an "AI computing power investment风向标" encompassing leaders like Nvidia, AMD, Intel, and Micron, also rose for the sixth straight week,疯狂上涨 nearly 250% from its April low. Measured by price-to-sales ratio, the Philadelphia Semiconductor Index valuation has reached a historical high.
Julien Lafargue, Chief Market Strategist at Barclays Private Bank and Wealth Management, said: "With earnings season now largely over, investors' focus will undoubtedly be firmly on the Strait of Hormuz and whether there is significant improvement in large tanker traffic through this critical chokepoint." According to机构汇编 data, about 82% of S&P 500 component companies reported Q1 profits exceeding expectations.
Momentum indicators have risen to extreme levels that have historically多次预示 short-term剧烈抛售. Goldman Sachs' trading desk wrote this week that, based on prime brokerage data, valuations for the highest momentum stocks are overstretched, with market positioning甚至处于 one of the highest levels in recent years. In the context of Wall Street institutions, momentum trading is not the type relying on a few technical indicators. Instead, it uses customized quantitative models incorporating indicators like relative strength, past 6-12 month returns (excluding the most recent 1-month reversal effect), volatility adjustment, industry neutrality, risk models, crowding, fund flows, and volume signals to dominate the so-called momentum trading strategy or momentum factor.
Homin Lee, Senior Strategist at Lombard Odier Asset Management, stated: "If attempts by ships to transit the Strait of Hormuz begin to succeed in the coming week, they will become key tests for the prospect of at least partial恢复 of Hormuz ship passage. We are open to the possibility that the latest惊人 headlines around the strait do not reflect a slide towards another major confrontation but rather默契谈判 around the shape of post-conflict U.S.-Iran arrangements."
New consumer price data to be released in the coming week may confirm that the U.S. inflation outlook remains a threat. According to the median estimate from a survey of economists, they expect the U.S. Consumer Price Index (CPI) for April to rise 0.6% month-over-month. Previously, March recorded the largest monthly increase since 2022. The U.S. Bureau of Labor Statistics CPI report will be released on Tuesday. However, the Federal Reserve is currently seen as likely to keep its benchmark interest rate unchanged for an extended period to observe how the impact of soaring oil prices evolves. Money market pricing continues to indicate the Fed will keep rates stable this year.
Media reported on Sunday that Dan Ivascyn, Chief Investment Officer of the world's largest fixed-income investment giant Pimco, stated in an interview that the surge in energy prices related to Iran closing the Strait of Hormuz poses new challenges for Fed policymakers, who have been striving to bring inflation down to the central bank's 2% target. Ivascyn stated: "The U.S. is further from that step, but given today's situation, you would see more monetary tightening in Europe, the U.K., perhaps even Japan, and I wouldn't completely rule it out for the U.S. either."
Comments