Market Report.
⚠️ Trump seems to be losing control, or at least showing desperate frustration. By the way, at the start of the conflict we noted in these reports that the operation launched against Iran was a huge mistake, because the US two‑year bond showed falls of 6%. At present, the cumulative decline already exceeds 11% — the market does not agree.
📱 President Donald Trump issued a new threat to Iran on Truth Social, warning “watch what happens” today. He literally said: “We are totally destroying the terrorist regime of Iran, militarily, economically, and otherwise, yet, if you read the Failing New York Times, you would incorrectly think that we are not winning” (…) “Watch what happens to these deranged scumbags today. They’ve been killing innocent people all over the world for 47 years, and now I, as the 47th President of the United States of America, am killing them.”
📰 However, several Western media outlets reported on Tuesday that Trump’s Middle East negotiator, Steve Witkoff, had allegedly tried on two occasions to offer a ceasefire to the Iranians, which they had reportedly rejected. Iranian authorities, for their part, said it was confusing that a ceasefire was being offered while they were being publicly threatened.
🎯 We explained in earlier reports that the US failure in this conflict, despite its overwhelming military and technological superiority, lies in a strategic issue and a cost asymmetry that neutralises or offsets that superiority. I recommend you read our earlier reports to understand this.
🇮🇱 Israeli PM Benjamin Netanyahu, who, according to many US Congressmen, is dragging Trump into this war, said he can’t guarantee regime change in Tehran without an internal uprising.
🕍 Netanyahu also emphasized that Israel is stronger than ever, and that Iran is no longer the power it was in the past. He also said: “We will make it to the return of the Messiah”.
🛰️ Meanwhile, according to Bloomberg, Russia is providing Iran with various forms of intelligence, including satellite imagery and drone targeting tactics, to help Iran retaliate against U.S. forces in the region.
🇬🇧 UK Defense Secretary John Healey stated that “Putin’s hidden hand is behind some of the Iranian tactics and potentially some of their capabilities as well,” noting the similarities with Russia’s attacks in Ukraine.
🤝 The intelligence and military support from Russia and potentially China is allowing Iran to employ tactics like targeting oil infrastructure to inflict maximum pain on its adversaries, putting a strain on the U.S. military and Gulf allies.
🌍 The West seems surprised. However, after the technological, armaments and logistical support that Ukraine has received from all these countries in its fight against the Russian army, it was to be expected that Russia would now be more than willing to assist those fighting Western forces.
📌 Let’s recap the data:
🌏 Asia is heavily dependent on Hormuz oil flows, with China, India, Japan, and South Korea accounting for 69% of crude oil and condensate transiting the strait in 2024-2025.
⛽ Japan, South Korea, India, and China have the highest dependencies on Hormuz oil, ranging from 45-75% of their total crude oil imports.
🚢 Refined oil products, including diesel, jet fuel, and gasoline, also transit Hormuz, with Asia and Europe being the primary recipients of these flows from the Middle East Gulf region.
🔥 Liquefied natural gas (LNG) trade is also significant, with Qatar exporting 9.3 Bcf/d through Hormuz in 2024, representing around 20% of global LNG trade. China, India, South Korea, and Japan are the top LNG importers dependent on Hormuz.
📉 A prolonged closure of the Strait of Hormuz, lasting more than a few weeks, would have the most severe impact on Asian economies, particularly Japan, China, and India, due to their high dependencies on Hormuz oil and LNG flows.
🇺🇸 The United States has relatively low overall exposure, with only around 2% of its total oil consumption coming from the Middle East Gulf region via Hormuz. However, California’s refineries are more vulnerable, with around 30% of their crude imports coming from Iraq, Saudi Arabia, and the UAE.
❓ Now, assuming an indefinite closure of the gulf’s energy, who owns the largest oil reserves?
🛢️ China owns the largest strategic oil reserves among the countries listed, with approximately 685 million barrels. The United States also has substantial reserves at ~395 million barrels, and when considering the total IEA member reserves (1.8 billion barrels collectively held by 32 member nations), that represents the largest pooled emergency stockpile.
🤔 However, if we ponder on this question, the dependence of each country on crude oil, the answer changes. Perhaps the real question is whether, given an undefined closure of the Strait of Hormuz, which countries have more days of reserves given their dependence on Middle Eastern crude oil?
📊 In this scenario, China’s crude oil stocks, despite being larger, provide fewer days of coverage than those of the US because China’s replenishment depends much more heavily on energy exported from this region.
🇮🇳 The most dramatic case in this respect is India, which relies on the Strait of Hormuz for 50% of its crude yet has the smallest crude reserves among the major countries. That is why the US said it would allow India to buy Russian crude — to which India replied that it did not need US permission to decide from whom it could purchase its energy (Europe might have something to learn from India here). India would have between 14 and 25 days of crude reserves.
📋 Next on the list are South Korea, China and Japan, given their high dependence on the Strait of Hormuz.
🔄 Are there alternatives to this?
🚧 Some have suggested alternative export routes such as the Saudi Petroline, with an export capacity of 5–7 million bpd, and the Habshan–Fujairah route in the UAE, with an export capacity of 1.5–1.8 million bpd. However, the Strait of Hormuz exports around 20 million bpd daily, so there are no realistic alternatives.
🥇 Why doesn’t the gold go up?
💰 Despite the escalating tensions in the Middle East, the price of gold has remained largely unmoved, trading between $5,050 and $5,200 per troy ounce.
💵 A stronger U.S. dollar and higher Treasury yields, which make gold less attractive as an investment.
📈 Concerns that the conflict could lead to prolonged inflation and higher interest rates, making yielding assets like bonds more appealing than non-yielding gold.
🏦 Despite the short-term volatility, major banks remain bullish on gold, with J.P. Morgan predicting prices will reach $6,300 per ounce by the end of 2026 and Deutsche Bank standing by a $6,000 year-end target.
Market view.
📉 S&P 500 futures continue to decline, and it now appears that the 6,800 support level is firmly behind us. The index is currently trading around 6,655 points.
📉 Nasdaq 100 futures have also broken below 24,500.
⚔️ Operation Epic Fury is increasingly looking — as we anticipated — more like an Epic Fail.
💲 The US dollar continues to surge, with the DXY index breaking above the 100 mark, putting heavy pressure on EUR/USD, which has fallen below 1.1500 and is now trading under 1.1450.
📉 The US 2-year bond has already fallen by more than 11% since the beginning of the conflict with Iran, with its yield exceeding 3.75%.
🇪🇺 In Europe, futures are also opening lower.
📉 The DAX 40 is falling towards 23,400, while Euro Stoxx 50 futures are declining to 5,700.
🛢️ Crude oil continues its ascent, with spot Brent climbing above $102 per barrel.
🥇 Gold futures are holding around $5,080 per ounce, cooling somewhat amid the stronger dollar environment.
₿ Meanwhile, Bitcoin appears to be regaining momentum, briefly touching $72,000 in recent hours and currently holding above $71,400.
