Global energy markets and equity indices are locked in a state of high-tension “sideways” trading as the world awaits the expiration of US President Donald Trump’s deadline for Iran to reopen the Strait of Hormuz.
The geopolitical “high noon” has left investors bracing for potential military escalation or a sharp shift in global supply chains.
Despite the looming threat of US action, the definition of “open trade” in the Strait of Hormuz has become a matter of perspective.
According to Norbert Rücker, head of economics and next generation research at Julius Baer, while trade remains a fraction of pre-conflict levels, “Iran-safeguarded” shipping has actually picked up.
Approximately 20 vessels, both visible and “dark,” moved outbound through the chokepoint over the holiday weekend.
Beyond Asian buyers, several Gulf nations are now collaborating with Iran to move cargo, including the first natural gas vessel to leave the Gulf since the escalation.
Julius Baer maintains a neutral view, suggesting that while oil prices are set for a “very pronounced spike,” they are likely to follow the historical pattern of being short-lived once supply chains partially re-adjust.
The physical reality of the conflict continues to push prices higher. WTI Crude surged 2.38 per cent in early yesterday trading to hit $115.97, driven by the rejection of US-backed ceasefire proposals.
“Oil flowing through Hormuz is still operating at only about 10 per cent of normal levels,” noted Vijay Valecha, chief investment officer at Century Financial. “The market may still be underestimating how tight conditions truly are.”
Gold and Silver remain under pressure as a “sell-on-rallies” market. Gold is currently consolidating within a tight symmetrical triangle, with $4,600 serving as a key support level.
Analysts suggest that any escalation following the deadline could trigger a flight to the US Dollar, further pressuring non-yielding assets like bullion.
In the US, the S&P 500 dipped 0.36pc as the risk mood deteriorated. The caution is fuelled not only by Middle East headlines but also by troubling ISM Services data. The report indicated that prices paid have climbed to their highest levels since 2022, while the employment component has fallen into contraction.
“These conditions – a slowdown in the labour market, rising costs, and persistent demand – point directly toward a stagflation scenario,” Mr
Valecha warned. US swap markets are now pricing in a small probability of a rate hike by September, reflecting fears that inflation remains uncontained.
The conflict’s impact on industrial metals is bifurcated. A report by Alpine Macro highlights that aluminium is the most exposed, as Gulf Cooperation Council (GCC) producers accounted for nearly 9pc of global output in 2025.
However, commodity strategist Kelly Xu remains constructive on the long-term outlook.
“The Iran conflict is likely to ultimately reinforce structural forces – energy transition and resource security– that underpin metal demand,” she stated. Ms Xu noted that while near-term turbulence is inevitable, the eventual “post-war reconstruction in the Middle East” will likely provide a bullish floor for the metals complex.
As the clock ticks toward deadline, market participants remain on edge, with high-gamma options positioning suggesting that any headline – positive or negative – could trigger violent intraday swings.
avinash@gdnmedia.bh
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