Global markets after Donald Trump announces Strait of Hormuz blockade

The US move to blockade the critical Strait of Hormuz has sparked a familiar market reaction: rising crude oil prices, rising bond yields and a strengthening dollar.

However, this time the response was quite limited, hindering oil movements. Stocks fell relatively modestly on Monday; This suggests that investors are pricing in more geopolitical risks and are less responsive to headlines.

“There’s a belief that a lot of this is negotiation tactics,” said Billy Leung, chief investment strategist at Global X ETFs, referring to Trump’s announcement. “Markets have reached the peak of uncertainty. The reaction function is no longer as extreme as before.”

Asian equities were trading at lower levels overall, but the magnitude of movements decreased significantly, with most major indicators down around 1%. Major US index futures also fell less than 1%.

Stain gold Prices lost approximately 0.5% to $4,720.28 per ounce. US dollar index added 0.38%. The strengthening of the dollar makes gold priced in US dollars more expensive for those who hold other currencies, reducing the attractiveness of bullion.

Leung said recent market movements show that investors are becoming more accustomed to geopolitical shocks and volatility has decreased compared to previous weeks. “So I think the market now has a better price and a better understanding of Trump’s intent,” he said.

Similarly, Jun Bei Liu, chief portfolio manager at Ten Cap, said volatility indicators suggest the worst of the panic may be over. “We saw the VIX start to rise a few weeks ago and that was probably the peak of the fear and selling…after that the market is really trying to get going.” [itself] outside.”

But a significant near-term risk lies in the political timeline surrounding U.S. military action. Leung noted the war powers resolution, which effectively gave the administration a limited window to seek congressional approval. “We will see increasing desperation in the Trump administration over the next few weeks,” he said, adding that markets may not yet fully appreciate this restraint.

US lawmakers are reportedly calling again The draft resolution to stop Iran was adoptedWe will force Trump to seek Congressional approval before launching further attacks.

Oil expected to fall, stocks expected to recover

The US move to blockade the Strait of Hormuz, where traffic has been at a trickle since the start of the war, has strengthened expectations for tighter energy supply, causing crude oil prices to rise and inflation concerns to disappear globally.

Inflation concerns also overshadowed interest rate cut expectations; Bond yields rose as the US dollar strengthened and stocks fell. The yield on 10-year Treasury bonds has risen more than 333 basis points since the war began. The dollar index gained approximately 1.4% in the same period.

U.S. oil prices have risen more than 55 percent since the start of the war. US crude oil futures for May delivery rose more than 8% to $104.93 per barrel as of 22:50 ET. Brent, the international benchmark for June delivery, rose by 7% to $102.17.

Analysts expect oil prices to eventually decline as the geopolitical situation stabilizes, even if short-term volatility remains.

Michael Yoshikami of Destination Wealth Management expressed expectations that the United States and Iran would eventually reach a negotiated solution that could quickly ease the current risk premium, saying, “I’m pretty confident that oil will drop from here… we’ll see oil back at $80 a barrel.”

Standard Chartered’s Steve Brice said high oil prices have dampened expectations for looser monetary policies, putting upward pressure on bond yields and the US dollar. “However, we view these as temporary events as we believe the United States is seeking ways to de-escalate tensions.”

Gold fell, acting less predictably, despite rising geopolitical tensions. Brice attributes this to emerging market central banks selling gold bullion to stabilize currencies, but he expects demand to return if tensions in the Middle East ease.

For now, markets appear to be balancing rising geopolitical risk with the expectation that hostilities will eventually ease, taking Trump’s comments into account.

“We believe the stock market’s positioning favors an uptrend, and so unless things get materially worse, stocks should continue to rise in the near term,” Brice said. He added that while the macro backdrop remains relatively constructive, investors are still on the defensive, leaving room for stocks to rebound if the conflict begins to ease.

This presents investors with a sensitive environment where geopolitical shocks still matter but no longer trigger the panic selling seen earlier during the conflict.

“This is not a binary outcome. It will be a gray area for a while,” Yoshikami said.