To The Moon

Where to start

Crude oil prices experienced a sharp decline on Monday, falling $15 from recent highs in just two trading sessions, swiftly reversing most of the geopolitical risk premium built up over the previous week. The pace of this shift has been difficult for markets to digest. After Brent crude surged past $100, global concerns over inflation and economic growth resurfaced. Additionally, according to a recommendation from U.S. Central Command General Michael Kurilla, airstrikes near the Strait of Hormuz were halted, as the operation had reached its limit of effectiveness and U.S. forces faced a shortage of ammunition for interception.

Under pressure, President Donald Trump paused strikes against Iran, stating that in-depth negotiations with Iran are ongoing, but the window for talks is limited and Iran will not be given excessive time. Trump warned that if negotiations break down, the U.S. will resume "very powerful" military action. In response, Iranian Foreign Ministry Spokesperson Baghaei stated that the U.S., at the start of the war, believed "Iran would collapse and surrender within three days," but months later, the U.S. finds itself in its current predicament while still taking pride in its crimes. Baghaei added that whenever global energy prices rise, the U.S. returns to the negotiating table.

While a ceasefire and talks have resumed between the U.S. and Iran, Iran and the Houthi rebels have not eased their blockade of the Strait. The Iranian Foreign Ministry spokesperson stated that the situation in the Strait of Hormuz remains unchanged, and the Strait is still closed. Prior to Trump confirming negotiations with Iran, Tehran emphasized it had not requested to resume talks with Washington. Mediators have conveyed messages from the U.S., but no negotiations are currently taking place with Washington, stressing that Tehran's primary task now is to defend its sovereignty, not advance talks. Israeli Prime Minister Benjamin Netanyahu has begun a trip to the U.S. to meet with Trump, with a key focus on discussing the Iran issue. The geopolitical situation remains full of suspense.

Regarding talks with Iran, Trump stated, "Time is running out. It will be either a quick deal or nothing at all." He emphasized that he believes Iran is interested in reaching an agreement, and once the war ends, one would see a sharp drop in prices. However, it is clear that if talks fail and conflict reignites, oil prices will not only fail to fall but will surge again. With limited supply buffers, the market cannot withstand another prolonged blockade. From an objective and rational perspective, both the U.S. and Iran want to stop the war, but the difficulty lies in bridging differences and reaching a viable agreement. The rapid price retreat reflects a renewed cooling of geopolitical tensions. Oil prices will continue to experience high volatility in line with geopolitical risks, requiring careful monitoring of the pace and cautious participation.

Daily Movements

WTI crude oil futures fell by $6.70, or 7.5%, closing at $82.61 per barrel. Brent crude oil futures fell by $5.81, or 6.34%, closing at $85.87 per barrel. INE crude oil futures fell by 4.5%, closing at 539.6 yuan.

The US Dollar Index rose by 0.06% to 101.53. The Hong Kong Stock Exchange USD/CNY fell by 0.07% to 6.7452. The US 10-year Treasury note rose by 0.17% to 108.52. The Dow Jones Industrial Average rose by 0.51% to 52,210.08.

Recent Highlights

Trump: Enough Patience for New Iran Deal, or Else War

U.S. President Donald Trump stated on the 27th that he has enough patience and time to reach a deal with Iran, but if a new ceasefire agreement is not reached, the U.S. will resume military strikes against Iran. According to U.S. media reports, Trump told reporters on Air Force One while en route to Michigan for an event that the current U.S.-Iran negotiations are "going well." "I think something will likely happen. If it does, good; if it doesn't, we'll go back to the situation from two days ago." He also claimed that U.S. ammunition stocks are currently ample, with a large variety of munitions available. Regarding his upcoming meeting with visiting Israeli Prime Minister Netanyahu on the 28th, Trump said the two have "some differences on the Iran issue, but overall, we are very close." In an interview with Axios, Trump said he decided to pause strikes on Iran to give negotiations a chance, but if diplomatic efforts fail, he could order the resumption of larger-scale military actions. He also stated, "Time is running out. It will be either a quick deal or nothing at all." Trump claimed he paused the strikes because mediating countries asked him to give negotiations another chance, emphasizing that he believes Iran is interested in reaching an agreement.

Strait of Hormuz Situation Unchanged, Iran Prioritizes Sovereignty, Indirect Dialogue Continues

(1) An Iranian Foreign Ministry spokesperson stated on Monday that the situation in the Strait of Hormuz has "not changed" and revealed that Iran and Oman have held positive discussions on the management of this strategic waterway, but stressed that Tehran's primary task now is to defend its sovereignty, not advance talks. (2) The spokesperson confirmed that Iran is maintaining information exchange with Washington through intermediaries but clearly stated that conditions are not yet suitable for direct talks with the U.S., accusing U.S. military actions of destroying the atmosphere needed for diplomacy and failing to fulfill previously reached understandings. (3) Regarding the Strait, Iran claims it has assumed responsibility for maintaining international shipping safety but will not allow the waterway to be used as a platform to threaten its national security, while criticizing U.S. and Israeli military actions for escalating regional tensions and undermining stability. (4) On the nuclear deal, Iran accuses European countries of failing to meet their commitments after the U.S. withdrawal, stating they bear significant responsibility towards Iran. The recent conflict has sharply deteriorated U.S.-Iran relations, with the U.S. launching consecutive days of strikes on targets inside Iran, and Iran retaliating with attacks on U.S. military assets in the region. (5) The focus of this conflict has evolved from initial regime change intentions into a broader game over control of the Strait of Hormuz. Iran has demonstrated its capability and willingness to influence global energy transport routes by setting passage conditions, making it difficult for geopolitical supply risks to be completely eliminated in the short to medium term.

Geopolitical Risk Suddenly Cools, Oil Prices Plunge 6% in a Single Day, Sentiment Swings Between Ceasefire and Tightening

(1) Following the U.S. pause in military strikes against Iran near the Strait of Hormuz, the market's worst-case scenario of escalating conflict threatening global supply was temporarily averted, causing international oil prices to fall sharply by over 6% during early Asian trading on Monday. (2) Brent crude futures briefly dipped below the $90 mark before trading near $91. Just last week, the benchmark had surged to $100 following an attack on a Saudi oil tanker in the Red Sea by Iranian allies. The rapid entry and exit of the geopolitical premium clearly illustrates the market's current sensitive nerves. (3) This ceasefire occurred after more than ten days of continuous clashes between the two sides. Iran's effective restriction of transit rights through the Strait of Hormuz had made oil prices highly sensitive to geopolitical news, while the U.S. military's conservative assessment of the marginal effectiveness of sustained bombing provided a window for a diplomatic shift. (4) The drop in oil prices quickly transmitted to equity markets, putting significant pressure on the energy sector. However, the market has not fully let its guard down, as the outlook for lasting peace remains unclear, and the conflict has already led to major variables such as a change in Iran's supreme leader, meaning structural supply-side risks are not yet eliminated. (5) A more critical chain reaction involves inflation expectations. Institutional analysis indicates that last week's nearly 10% rise in crude oil has already heightened market concerns about a sustained global inflationary shock and indirectly fueled bets on a more aggressive Fed rate hike path. The implied probability of a rate hike at this week's FOMC meeting has jumped from around 10% to nearly 40% in just a few days, with a fierce simultaneous pricing battle unfolding between policy and geopolitical factors.