Hi YXI friends,
The US has tried to escort ships in the Strait of Hormuz to force open Iran’s blockade. But it has drawn Iranian fire, which also targeted the UAE with fresh missiles. Meanwhile, Iran's new Supreme Leader, Mojtaba Khamenei, has suggested he will be even harder-line than his father, with no concessions on Iran's nuclear or missile programs.
All of the above has now put the ceasefire or further negotiations of peace talks at risk. This could either be something that Iran had wanted from the beginning (i.e. stalling for time), or that its internal factions are at a severe standoff with each other and are now acting independently without coordination.
How is the state of the markets in this context?
Oil has moved very little, with the front WTI contract still above $100 but failing to make new highs. Rates are now pricing the odds of the next hike. Equities are firm around the ATHs. Crypto is making a quiet climb.
What gives? I’m not sure. There may be a world where all of the things above can coexist for a long time, and we could be entering that world. The longer it lasts, the harder FOMO kicks in, and equities could self-fulfil all the way up. That is certainly the key ingredient for a parabolic, blow-off top.
I prepare to give a little more time on the observational side before throwing myself in and declaring a new paradigm. I am always happy to be wrong - the world is an infinite number of possibilities. It would be boring if we could predict every turn of events. But instead, we can constantly learn and update our understanding. And that’s exciting.
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