I guess if you take away the worst case scenario, that's actually helpful for lower oil prices. A couple of things to consider, though. One, Ali McCrossin RBC said over the weekend that she would caution against that knee jerk reaction that, quote, The worst is behind us.Now, the other factor to consider here, irrespective of the supply issue that may or may not happen with Iran is the demand side. So there's been a lot of stockpiling by China, a lot of stockpiling by other countries within the West as well ...

Oil Market Dynamics - Oil prices initially spiked following US strikes on Iran but later decreased [1] - US oil production direction is likely flat to down, despite potential incentives from higher oil prices [3] - Easing permitting processes in areas like Alaska could incentivize more drilling [6] - OPEC is adding 400,000 barrels a day, increasing global oil supply [7] Geopolitical Risks & Shipping - The Strait of Hormuz has never been closed, even during the Gulf War [8][9] - Increased risk in the Strait of Hormuz has led to shipping day rates rising from $24,000 to $100,000 per day [10] - Almost all exported Iranian oil is bought by China [11] - Potential disruptions could occur at Bab el Mandeb strait and the Suez Canal, in addition to the Strait of Hormuz [13] Iranian Oil & Sanctions - Iran exports 15 million barrels of oil a day, despite sanctions [15] - Disruption of the Strait of Hormuz would be economic suicide for Iran, as 90% of its oil is exported from Kharg Island [14]

Geopolitical Assessment - The operation was successful in execution, with aircraft delivering GBU 57 and submarine-launched lambs offshore [1] - A good battle damage assessment is needed, but may be incomplete until inspectors are on the ground [3] - Potential Iranian responses include using Shia militia groups in Iraq, launching missiles against U S forces in the Middle East, targeting American officials globally, or disrupting shipping in the Strait of Hormuz [4][5] - Iran may calibrate its response to satisfy domestic needs without provoking a significant escalation from the US [7] - The effectiveness of Iran's chain of command is uncertain, potentially explaining the delay in response [9][10] Nuclear Concerns - There are concerns about Iran's potential to reignite efforts to achieve nuclear status, especially with 400 kilograms of enriched uranium missing [11] - Iran possesses approximately 900 pounds (转换后约 408 公斤) of 60% enriched uranium, close to the level needed for nuclear weapons, and its location is unknown [11][12] - Even if Iranian infrastructure is destroyed, it may be rebuilt over time, potentially energizing their nuclear ambitions [12][13] Deterrence and Regional Security - Deterrence is based on capability and willingness, with the US demonstrating its willingness to act [14][15] - A clear message is important for deterring disruption of waterways like the Strait of Hormuz [17] - Potential responses to Iranian aggression in the Strait of Hormuz include targeting the Iranian navy, mine layers, swarm boats, and missile batteries [17][18] - The US involvement is contingent on Iran's response, with a preference for negotiation between Iran and Israel, including a return to the nonproliferation regime [20][22]

Geopolitical Event & Market Reaction - U S military strikes on Iranian nuclear facilities led to initial market bracing, but oil spike quickly faded, and stock market reaction was muted [1][2][3] - Market focuses on oil prices as the main channel of impact, with the Strait of Hormuz operating normally and oil markets being oversupplied [34] - Historically, geopolitical events often don't have as large or negative a market impact as expected [34] - Credit markets still face favorable technical forces, and yields remain attractive [35] Oil Market Dynamics - Initial oil price surge of nearly 6% in Asia trade quickly faded [3][48] - A scenario where the Strait of Hormuz is closed or severely disrupted could lead to oil spiking into triple digits, potentially reaching $130 per barrel [36][37] - The Strait of Hormuz carries 20% of the world's oil consumption daily [36] - Minor disruptions to oil supply may not significantly impact oil prices due to well-supplied market [38] Airline Industry Impact - Airlines are warning of potential route cancellations into parts of the Middle East, leading to weakness in European airline stocks [5] - British Airways and Qatar Airways announced cancellations heading into the Persian Gulf [53] - Airlines may face higher fuel costs due to longer routes, potentially pressuring margins [89][90] Economic & Financial Considerations - Growing deficits and potential for higher energy prices could lead to a growth slowdown and higher inflation [65] - Budget concerns may come into sharper focus if the U S shifts to a war footing, potentially increasing the deficit [39][40] - Investors are cautious and waiting for better levels, with uncertainty leading to a potentially frozen market [32][42][70]

Market Reaction & Risk Assessment - Initial market reaction to the US attack on Iran is expected to be a knee-jerk sell-off of risk assets and a buying of haven assets, followed by a quick rethink [2] - The severity of the market reaction depends on whether the conflict remains regional or broadens to affect US assets or extends beyond the Middle East [3] - A contrarian view suggests that if the nuclear threat of Iran is significantly hampered, it could remove a major risk to Middle East stability and be a net positive for stocks [6] - Monitoring trade flows in the Strait of Hormuz, Red Sea, and Horn of Africa is crucial; major disruptions would trigger alarms, first in commodities, then FX, and finally equities [11][12] Oil Market - Oil prices initially increased by approximately 4%, later paring back gains but still up almost 3% [3][4] - Brent crude's movement above $80 a barrel, a level not seen since early January, is a key number to watch [4] - Whether oil prices remain at or exceed $80 will be determined by events in the Strait of Hormuz [5] Treasury Market - The Treasury market's reaction is complex, influenced by both the Middle East situation and the US fiscal situation [8] - Concerns about higher energy prices potentially leading to higher inflation could send bonds in the opposite direction [8] - Market activity in long-dated bonds is currently muted, with low volume and little price change, but this could change soon [9] Geopolitical Factors - Iran's response, and its severity, is a key factor to watch [11] - The Tel Aviv 35 index closed at a record high for six consecutive days, indicating a positive market sentiment in Israel [7]

LISA: THANK YOU SO MUCH. JOINING US IS STEPHEN SHORCK. HOW LONG DO YOU THINK THAT THEY WILL LAST.IT WILL DEPEND ON FURTHER ESCALATION AND HOW LONG THE HOSTILITIES. WE ARE LOOKING AT A SITUATION OF A WAIT AND SEE. THE MARKET HAS PRICED IN GREATER VOLATILITY.WHAT WE SAW BEFORE LAST THURSDAY WAS A MARKET SWITCHING INTO THE BRENT AND WTI BEGINNING IN 2026 HAD SWITCHED TO A MARKET WHERE PRICES FOR JANUARY WERE CHEAPER THAN FEBRUARY AND SO FORTH. THIS IS A CLASSIC FUNDAMENTAL TELLTALE THAT THE MARKET IS PRICING I ...

[CC may contain inaccuracies] How important is the Strait of Hormuz right now. And even if we don't necessarily see a closure or just disruptions in that region. I mean, massively important, 20% of the world's oil is flowing there and the roughly equivalent amount of the world's gas.What is particularly challenging right now is some of the jamming that's happening on GPS devices and the like, which which is a concern. The Strait of Hormuz is, at the end of the day, the artery through which the world's energ ...

Geopolitical Risk & Oil Supply - Approximately one-fifth (20%) of global oil consumption passes through the Strait of Hormuz, making it a critical choke point [2] - Historically, disruptions to maritime traffic in the Strait of Hormuz have occurred, including attacks on tankers during the Iran-Iraq war [3][4] - Escalating conflict could lead to disruptions in traffic, potentially causing insurance costs for tankers to spike [7] - Iran may disrupt energy supplies to internationalize the cost of the conflict, potentially targeting energy facilities [9] China's Role - About one-third of the oil passing through the Strait of Hormuz is now going to China, marking a shift in global oil flows [6] - China's reliance on Iranian oil, especially for teapot refineries, raises questions about Iran's response to the conflict [7] - China is incentivized to de-risk the situation, but its influence over Iran is uncertain [10] Potential for Regional Instability - Iranian-backed militias in Iraq pose a risk to Iraqi oil infrastructure, particularly near Basra, where Iraq produces approximately 44 million barrels a day (44%) [11][12] - Proxies like the Houthis, retaining ballistic missile capabilities, could initiate cross-border attacks [13]

Market Impact of Geopolitical Tensions - Oil prices are surging following strikes by Israel, with the market closely watching Iran's response [1] - The Strait of Hormuz is a key chokepoint, with Iran potentially disrupting a quarter of the world's oil supply [3] - JPMorgan simulations assign a 7% probability to a worst-case scenario of oil reaching $130 per barrel [6] Potential Disruptions and Risks - A worst-case scenario could see oil prices rise to $120 per barrel due to Strait of Hormuz closure [4] - Lower-level actions by Iran, such as harassing shipping, could increase shipping rates and cause tanker shortages [4] - Traders are buying call options to protect against potential escalation [5] Iranian Oil Supply - Sanctions could be reimposed, potentially removing Iranian barrels from the market [8] - The market needs to prepare for the possibility of Iranian barrels being removed from the market, even without military action [9]

Market Reaction to Geopolitical Events - Initial reports of no damage to Iranian oil infrastructure led to a price correction after Brent crude prices initially spiked by 13%, settling at a 7% increase [1] - The market is closely monitoring the potential impact on Iran's oil production, export capabilities, storage, and refining capacity [2] - The market is sensitive to the possibility of a larger conflict involving the Strait of Hormuz, despite the difficulties and potential detriment to Iran [3][4] - Potential self-sanctioning by ship owners avoiding the region due to prolonged conflict could reduce oil and gas supply [5] - The market is in a wait-and-see mode, closely observing Iran's response to the Israeli attack and Israel's subsequent actions [6] Supply and Demand Dynamics - The oil market is currently considered frothy and oversupplied, providing a buffer against potential supply disruptions [9] - Brent crude prices had risen to $78, after being at $60 at the beginning of May due to concerns about the trade war impacting demand [10] - Weaker oil demand, influenced by trade war concerns and lagging Chinese industrial output, mitigates the immediate impact of potential supply reductions [10][11] - Despite the oversupplied market, the potential disruption of the Strait of Hormuz, though a remote possibility, is causing price gains [12] Geopolitical Developments - Reports indicate a large-scale Israeli attack involving over 200 Air Force planes targeting 100 Iranian nuclear and missile facilities [7][8] - Iran's response includes a statement emphasizing the necessity of nuclear enrichment [7][8]