Market Report.
📈 Markets are rising on a wave of optimism, despite the fact that the Strait of Hormuz appears to be more tightly closed than ever; however, the prevailing view is that an agreement between Iran and the US is within reach, given that a second round of negotiations is imminent.
⚠️ S&P 500 futures are just a few points away from all-time highs. Exercise the utmost caution in the face of potential disappointments or overly high expectations.
❓ How closed is the Strait of Hormuz?
🚢 The U.S. has deployed over 10,000 sailors, Marines, and airmen along with more than a dozen warships and dozens of aircraft to enforce the blockade of this vital global trade route, which normally carries around 20% of the world’s oil supply.
🌊 Despite the blockade, the flow of traffic through the strait has only slowed to a trickle, contrary to Trump’s earlier claim that a two-week ceasefire agreement with Iran would hinge on the full reopening of the waterway.
🚫 The U.S. claims it has turned back six merchant vessels that tried to comply with instructions to re-enter Iranian ports. Traders have been closely monitoring vessel tracking data to see how the blockade is being implemented in practice. This includes the movements of specific ships like the U.S.-sanctioned tanker “Rich Starry”, which appeared to transit through the Strait of Hormuz early on but then turned around in the Gulf of Oman. Another tanker, the “Elpis”, was also seen pausing its journey in a similar location to where the “Rich Starry” U-turned, suggesting some ships may be deterred from attempting to pass through the blockade.
📰 However, according to Wall Street Journal quoting two U.S. officials, more than 20 commercial ships have passed through the strait in the past 24 hours, including Iranian and Chinese tankers.
🇨🇳 China had stated clearly before the blockade began that its ships would not be stopped, indicating the U.S. is facing challenges in fully enforcing the blockade as intended.
📉 The continued movement of vessels through the strait, despite the U.S. blockade, suggests the measures are not as effective as the Trump administration had hoped in choking off Iran’s oil exports and trade.
🤝 New negotiations?
🏛️ The White House has confirmed that a second round of negotiations between the U.S. and Iran is currently under discussion, though no official schedule has been set yet.
🕊️ The White House and Iranian officials both seem open to resuming negotiations in the coming days or weeks, keeping hopes alive that a deal could still be reached before the current ceasefire expires on April 21.
🇮🇱 Israel-Lebanon talks?
🔥 One of Iran’s lines for the total ceasefire is to be extended to Lebanon, which is under attack and invasion by Israel. The US seems to be making efforts to meet this condition.
🤝 U.S. Secretary of State Marco Rubio hosted the first direct talks between Israel and Lebanon in decades on Tuesday, though the progress made was unclear.
📜 The talks brought together representatives from the two countries, which have technically been in a state of war since Israel’s establishment in 1948. They entered the talks with conflicting agendas.
🗣️ The U.S. State Department said the two sides had “productive discussions on steps toward launching direct negotiations,” but did not indicate they had reached any common ground.
🇺🇸 The involvement of Secretary of State Rubio signals Washington’s desire to see progress in resolving the conflict between Israel and Lebanon, which has been complicated by the role of Hezbollah.
🌏 The conflict with Iran is causing tensions between the US and China, as Bessent admits.
💬 U.S. Treasury Secretary Scott Bessent accused China of being an “unreliable global partner” during the ongoing Middle East war, citing China’s actions to hoard oil supplies and limit exports of certain goods.
🦠 Bessent drew parallels between China’s current actions and its behavior during the COVID-19 pandemic, when it was accused of hoarding medical supplies.
🛢️ Bessent said China has been stockpiling more oil instead of helping to ease the global supply shortage caused by Iran’s closure of the Strait of Hormuz, which carries 20% of the world’s oil.
🏦 China already has a strategic petroleum reserve roughly the same size as the entire reserve held by the 32-member International Energy Agency, but it continues to purchase and hoard oil, according to Bessent.
✈️ Bessent said the tensions over China’s actions during the war remain unclear if they will derail U.S. President Donald Trump’s planned visit to Beijing in mid-May, but he stated that Trump and Chinese President Xi Jinping have a very good working relationship.
🇨🇳 Chinese responds: A Chinese embassy spokesperson called for an immediate end to military operations in the Middle East to prevent further impact on the global economy.
❓ Why would the price of gold be falling in times of war and instability?
🥇 Gold prices have pulled back by around 10% from their late-January peak, slipping into correction territory despite heightened geopolitical risks from the ongoing Iran war.
🏦 This reversal marks a stark shift from last year’s gold rally, which was underpinned by steady central bank buying. Now, some central banks are reportedly selling gold to raise cash and defend their currencies.
📊 The drivers behind this central bank gold selling include: Higher oil prices straining import-dependent economies, currency volatility forcing central banks to intervene more in FX markets and needs to fund increased energy and defense expenditures.
🌍 Emerging market central banks appear to be at the forefront of this trend, with Turkey, Russia, and Ghana among those reported to have sold gold reserves in recent months. However, these sales are often tactical rather than structural, and major consumers like China may step in with opportunistic buying if prices fall further, potentially providing a floor.
💵 Another possibility, which we have already mentioned in previous reports, is that the rise in US bond yields could attract more investment, thereby increasing demand for dollars and leading to the liquidation of gold reserves in order to take advantage of attractive US Treasury yields.
🏦 And how have the banking earnings reports been in the US?
📈 The performance of the major banks’ trading desks during the volatile quarter underscores the industry’s reliance on market turbulence to drive revenue.
💳 Wall Street banks have reported at least $100 billion of exposure to private-credit firms, raising concerns about credit quality and the growing impact of artificial intelligence in this closely watched industry.
🏆 JPMorgan Chase reported its highest-ever quarterly trading revenue, with record stock-trading results boosting the total past the firm’s previous record by almost $2 billion.
📊 Citigroup’s trading desks, particularly in fixed income and equities, helped push the bank to its highest quarterly revenue in a decade, marking a milestone in CEO Jane Fraser’s turnaround plan.
📉 Wells Fargo fell short across its primary income streams in the first quarter, pushing its shares down as the bank reworks its business mix to accelerate growth.
📂 Wells Fargo reported $36.2 billion of exposure to private-credit firms, part of its $210.2 billion in loans to nonbank financial firms. The bank said these loans are structured well and provide good risk-return. The rocky quarter for Wells Fargo raised questions about the bank’s path to long-term profitability as it tries to regain its footing after getting a key regulatory shackle lifted last year.
Market View.
📈 Optimism is spreading across markets, which are now pricing in a second round of negotiations between the United States and Iran.
🚀 E‑mini S&P 500 futures are approaching record highs, trading above the 7,000 level.
💻 Nasdaq 100 futures are attempting to break through the 26,000 barrier, sitting just over 300 points below their all‑time highs.
💵 The US dollar has continued to weaken as the prospect of an agreement gains traction. The DXY index fell to 98.00 before rebounding slightly to 98.16. This facilitated a bullish move in EUR/USD, which climbed above 1.1800 before easing back to around 1.1785.
🇪🇺 In Europe, DAX 40 futures have shown more modest gains, trading near 24,245, while Euro Stoxx 50 futures have performed somewhat better, holding above 5,900.
🛢️ Oil prices have continued to soften, with spot Brent crude dropping below $95 per barrel.
🥇 Gold futures approached $4,900 per ounce but have pulled back in recent hours to around $4,835.
₿ Meanwhile, Bitcoin also posted gains, briefly trading above $76,000 during yesterday’s session before retreating to approximately $73,900.
