To say the market is on edge is an understatement.
It was a morning that began with much promise and ended with a familiar feeling of dread. Japan hit a new record for the second straight session, South Korean chipmakers led a sharp rise in tech names on extraordinary profits from SK Hynix, and the mood on Asian trading desks was, briefly, one of cautious optimism.
Then Iran opened fire on three container ships near the entrance to the Strait of Hormuz, then boarded and seized the MSC Francesca and the Epaminondas, and the situation changed.
The Nikkei closed the day down 0.9%. The broadest MSCI Asia-Pacific index fell 0.5% and fell 0.5%. The speed of the reversal was instructive: A single unverified report on social media that the ceasefire had failed was enough to push markets higher and send stock futures tumbling — a move that unfolded almost as quickly as it materialized. However, it illustrates with uncomfortable clarity how the current recovery is based on the assumption that fighting will not resume.
Strait of Hormuz: new escalation
The seizure of the two ships marks a change in Tehran’s position. For several weeks, Iran has used the threat of maritime disruptions as a negotiating instrument without fully exercising it. This calculation appears to have changed. Only one vessel – the bulk carrier LB Energy – was observed passing through the strait early Thursday; the Ocean Jewel tanker interrupted its passage after Iranian forces opened fire.
As U.S. warships simultaneously maintain a naval blockade on ships bound for Iranian ports — a move that Tehran’s Foreign Minister Abbas Araghchi called a blatant violation of the ceasefire — the waterway that carries about a fifth of the world’s oil supplies is crippled.
(spot) has now jumped around 32% since the start of hostilities at the end of February, recently returning above US$100/barrel for a second consecutive session. You will recall that President Trump extended the ceasefire earlier this week, but offered no firm deadline…
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