Over the weekend, renewed exchanges of fire between Israel and Lebanon reignited tensions in the US-Iran negotiations. Iran announced that shipping traffic through the Strait of Hormuz has plummeted to zero, effectively placing the strait under a de facto blockade and setting market nerves on edge once again. Absent any news of a negotiated settlement, crude oil is poised for a substantial rebound next week, though the outlook for other commodities and equity indices remains grim.
With the US midterm elections approaching, a "fight-and-talk" dynamic will define future market action. The US is eager to restore navigation to lower oil prices and fulfill campaign promises, while Iran aims to leverage the strait's reopening to extract maximum economic concessions. Consequently, negotiations will not be resolved overnight. This will lead to massive price volatility—creating a paradise for short-term traders, but signaling that medium- to long-term investors should exercise caution before entering the market.
Which Assets Stand to Benefit?
Unsuccessful negotiations provide a short-term bullish catalyst for crude oil. Oil prices recently experienced a significant drop, driven entirely by the signing of a memorandum and market expectations of a rapid reopening of the strait. However, with the current de facto re-blockade, Middle Eastern spot crude prices remain elevated, which will likely drag WTI crude futures higher to converge with spot prices, triggering a rebound. Technically, the gap-down seen last Monday (following the memorandum signing) will act as overhead resistance for the oil price rebound, roughly around the $80/barrel mark for WTI. Investors looking to play this bounce should be mindful of setting take-profit levels and apply a stop-loss if oil hits new recent lows.
$United States Oil Fund LP(USO)$ $WTI Crude Oil - main 2608(CLmain)$ $E-mini WTI Crude Oil - Jul 2026(QM2607)$ $E-mini Crude Oil - main 2608(QMmain)$ $Micro WTI Crude Oil - main 2608(MCLmain)$ $Natural Gas - main 2608(NGmain)$
Will Gold Prices Continue to Plunge?
Since the blockade of the strait, oil revenue for Gulf nations has plummeted. Given their highly concentrated revenue streams, a drop in oil income translates to significant domestic balance-of-payment deficits. As a result, they are under urgent pressure to liquidate highly liquid, premium assets—with gold being a prime target. Consequently, since the blockade began, gold prices have shown no signs of recovery and have suffered considerable losses. The continued blockade remains a bearish signal for gold. The next major support level for gold is around 3,800 (COMEX Gold). Next week, observe whether there is another push lower; if so, one could attempt to catch a rebound near this support level. The current magnitude of gold's decline is not uncommon historically. Whether it can hit new highs in the future will depend on the Federal Reserve coordinating with rate cuts and monetary expansion. However, after extreme drawdowns, the resulting bounces are usually quite substantial, so the key is simply to manage your trading rhythm.
$Gold - main 2608(GCmain)$ $E-Micro Gold - main 2608(MGCmain)$ $1-Ounce Gold - main 2608(1OZmain)$ $Silver - main 2607(SImain)$ $E-mini Silver - main 2607(QImain)$
US Indices: No More Corrections, Straight to New Highs?
Despite the Fed's hawkish stance and a sudden surge in market expectations for rate hikes this year, the fervor of the tech bull market remains unfazed. With the upcoming IPOs of several blockbuster tech stars, US equity indices are heading into a white-hot frenzy. While a bubble is certainly present, pinpointing when it will pop requires closely following the market's tempo. The gap down in Nasdaq futures last Monday, triggered by the memorandum signing, serves as an excellent tracking indicator. Since equity index futures trade 23 hours a day, they reflect a fully priced-in market consensus, making gaps rare and, therefore, crucial reference points when they do occur. As long as the index does not break below this gap level, the tech frenzy can be considered intact, requiring little adjustment to positions. However, if this level is breached, investors should actively seek safe havens or hedge their portfolios to prevent heavy losses from extreme volatility.
$E-mini Nasdaq 100 - main 2609(NQmain)$ $E-mini Dow Jones - main 2609(YMmain)$ $E-mini S&P 500 - main 2609(ESmain)$ $Invesco QQQ(QQQ)$ $SPDR S&P 500 ETF Trust(SPY)$ $Dow Jones(.DJI)$ $S&P 500(.SPX)$ $NASDAQ(.IXIC)$
Comments