Market Report.
🇺🇸 President Trump continues to try to stabilise the situation following the chaos unleashed by the attack on Iran. Division among Western allies, division among US congressmen, a potential inflationary shock looming if the situation in the Strait of Hormuz continues. Has Donald Trump fallen into a trap? If so, is there a plan B?
🗞️ The Washington Post reports that U.S. and Israeli officials were not prepared for the speed and scope of Iran’s retaliation, suggesting the response exceeded prior expectations in both scale and timing. The report indicates that planners may have underestimated Tehran’s ability or willingness to respond quickly, adding new uncertainty to the trajectory of the conflict.
🛂 American citizens are trapped in the Middle East. Mike Huckabee, Trump’s ambassador to Israel, admitted Tuesday that Americans in Israel have “very limited options” as Ben Gurion Airport remains closed with no timeline for reopening. He suggested Americans take a tourist bus to Egypt to find flights out, while warning that routes through Jordan are unreliable. The U.S. Embassy, he said, is currently unable to evacuate or directly assist Americans leaving Israel.
📈 Sustained high oil prices would boost inflation and slow economic growth across major economies, putting central banks in a very difficult position. For Europe, prolonged high energy prices could push the economy to a final recession.
🛢️ A prolonged closure of the strait would remove approximately one-fifth of global physical oil supply in the short term, unless all available diversion capacity is utilised. The EU’s direct exposure to Persian Gulf crude oil (which must pass through Hormuz) is moderate but not trivial, accounting for around 15% of EU crude oil imports.
🚢 For refined products, European exposure is greater, with around 20% of diesel and gas oil imports and more than half of aviation kerosene imports passing through the Strait. For LNG, around 30% of European imports come from Qatar and the Emirates, which depend on transit through Hormuz.
💥 A total closure of the strait could push the price of Brent crude oil to $120-200/barrel, representing a 50-150% increase and adding 2-4 percentage points to overall inflation in the EU.
⚓ President Trump has announced that the U.S. will provide insurance guarantees and naval escorts to ensure safe passage for oil tankers and other vessels through the critical Strait of Hormuz, in an effort to head off a potential energy crisis caused by the war with Iran.
🏦 The U.S. International Development Finance Corporation (DFC) will offer insurance “at a very reasonable price” to help ensure the flow of energy and commercial trade in the Gulf region. The U.S. Navy will begin escorting tankers through the Strait of Hormuz “as soon as possible” if necessary.
🚨 The Trump administration’s military strikes against Iran have created significant challenges around ensuring insurance and protection for oil tankers transiting the critical Strait of Hormuz.
⚠️ There are concerns that the administration did not adequately plan for and set up the necessary insurance mechanisms before launching the attacks, raising doubts about their preparedness.
🚢 Providing insurance coverage for the hundreds of tankers moving through the strait is a complex and daunting task, especially since most are not U.S.-owned or flagged vessels.
❓ It is unclear whether the Development Finance Corporation (DFC) has the funds and expertise to effectively underwrite such large-scale maritime insurance risks, and any such efforts would likely face legal challenges. The U.S. Navy escorting shipping through the narrow and hazardous strait also faces significant logistical and operational hurdles, with the Navy reportedly reluctant to get directly involved.
🗳️ This represent a real political risk for Trump ahead of the midterm elections.
🇬🇧 Middle East conflict threatens to undermine the UK’s fiscal outlook: The assumptions underpinning Chancellor of the Exchequer Rachel Reeves’ budget projections could quickly become outdated as a result of the war involving the United States and Israel against Iran.
💷 A surge in energy prices triggered by the conflict risks eroding Reeves’ fiscal headroom, by fuelling inflation and pushing up government borrowing costs.
📊 It is estimated that a sustained increase in oil and gas prices could reduce Reeves’ fiscal space from £24 billion to just £16 billion.
🏛️ Prime Minister Keir Starmer may come under pressure to allocate billions of pounds to support households facing higher energy bills, potentially testing the government’s fiscal discipline.
🌍 Division among US allies?
🇬🇧 Keir Starmer distances himself from US-led attacks on Iran under Trump: he supports defensive actions but rejects offensive operations without legal and strategic basis.
🇨🇾 Cyprus demands British guarantees that its bases will only be used for humanitarian purposes.
🇨🇦 Canada publicly rebuked the United States and Israel: ‘The United States and Israel acted without engaging the United Nations or consulting allies — including Canada.’
🇪🇸 Spain denies the use of US bases on its territory for attack operations. Its government has defined this war as an illegal action outside the protection of the UN Security Council.
🇫🇷 France announces the reinforcement of its nuclear forces, but appears to show support for the war by sending naval forces to the region. French President Macron: ‘We are taking the initiative to build a coalition to gather resources, including military resources, to resume and secure traffic on these maritime routes that are essential to the global economy.’
🇩🇪 Germany does not seem to have much decision-making capacity, considering its foreign policy since the beginning of the conflict in Ukraine, as it appears to be entirely directed by the US. Let us not forget the strong US military presence in the country since the end of the Second World War.
🗣️ Merz publicly endorsed the goal of ending the current Iranian regime, calling it a “terrible” or “dreadful” regime and saying Germany and the U.S. were aligned on the objective of “getting rid of” it.
🇺🇸 Growing divisions within the United States?
🏛️ Representative Thomas Massie has alleged that Israel exerts undue influence over the US government and is shielding powerful billionaires in relation to the Epstein files.
🗨️ Meanwhile, Congressman Jason Crow, responding to the White House briefing on Iran, stated:
📢 “It’s very clear this is a war of choice by President Trump. There was no imminent threat to the American people, to American facilities, or to American personnel.”
🔄 In addition, Senator Marco Rubio appeared to contradict himself within the space of 24 hours when speaking to the press.
🗓️ On Monday, Rubio said: “I never said we attacked because Israel was going to attack.”
📆 However, the following day he stated: “We knew Israel was going to strike Iran, so we had to act first.”
🧩 A possible plan B:
🕵️ But the CIA and the US government are already working on a plan B. And yes, once again, the plan involves arming extremist or paramilitary groups and infiltrating them into a country to overthrow its government. This is one of the strategies most frequently used in recent decades by successive US administrations to achieve their objectives.
🎯 The CIA is working on a plan to provide military support to Kurdish forces in Iraq, with the explicit goal of “fomenting a popular uprising in Iran” amid the ongoing U.S.-Israeli air campaign.
🚚 The plan involves using Iraqi Kurdistan as a logistics hub to transfer weapons and support cross-border operations by Iranian Kurdish fighters against Iranian security forces in western/northwestern Iran.
🔥 U.S. officials see this as a way to “create chaos” and stretch the Iranian regime’s security apparatus thin, potentially encouraging broader defections and a popular revolt against the government.
❓ The question is, if it was an option, why didn’t they try before a direct war? Second, is it legitimate to constantly arm rebel groups and infiltrate them in countries?
Market View.
📉 E‑mini S&P 500 futures broke below the 6,800‑point support level yesterday and are now attempting to reclaim it, trading marginally back above 6,800.
💻 A similar pattern unfolded in Nasdaq 100 futures, which fell towards the 24,350‑point area before rebounding to around 24,655 points.
💵 The US Dollar Index (DXY) continues to attract strong attention. Yesterday it moved above 99.50, before easing back to approximately 99.00. This has generated significant volatility in the FX market, with EUR/USD plunging below 1.1550 and subsequently rebounding towards 1.1600.
📈 Meanwhile, the US 2‑year Treasury yield continued to rise, approaching 3.60% yesterday — marking an increase of nearly 7% since Monday. The negative macroeconomic effects of the war against Iran are becoming increasingly evident.
📉 European markets also experienced sharp declines.
🇩🇪 DAX 40 futures dropped towards the 23,600‑point region before rebounding to around 23,930 points.
🇪🇺 Euro Stoxx 50 futures fell below 5,750 points, later recovering to approximately 5,815 points.
🛢️ Oil prices continue to climb, with spot Brent crude reaching $84.25 per barrel in recent hours.
🥇 Gold futures pulled back towards the $5,000 per ounce level yesterday but have since rebounded to around $5,165.
₿ Surprisingly, amid this volatility and broader selling pressure, Bitcoin is holding up relatively well. It is once again approaching the $70,000 resistance level, currently trading near $69,300, and forming potentially constructive bullish patterns that could signal a recovery attempt.
