To The Moon

Good morning. Let's begin by focusing on the escalating situation in the Middle East.

The United States military is set to impose a maritime blockade on Iran, effective from 20:00 Greenwich Mean Time on the 14th. According to reports, the US Navy-supervised Joint Maritime Information Center stated that the blockade will apply to all vessels, irrespective of their flag, covering Iran's entire coastline including its ports and oil terminals. Transit passage through the Strait of Hormuz for neutral ships bound for or departing from non-Iranian destinations will not be impeded. Shipments of humanitarian supplies will be permitted but will be subject to inspection.

In a related development, former US President Donald Trump stated on social media that the Strait of Hormuz is and will remain open, regardless of Iran's involvement. He announced that the US would re-impose a "blockade on Iran," targeting only Iranian vessels or clients to restrict their access to the strait, while all other nations would have fair and open use. He further declared that the US would impose a 20% fee on all cargo transported through the strait, with processes and deployments to begin immediately.

Reports indicate that Trump has formally notified Congress of a renewed state of hostilities with Iran. In a letter to congressional leaders dated the 10th, he stated that US forces conducted "defensive strikes" against targets inside Iran on the 7th.

The US military launched a third consecutive night of airstrikes on Iran. The US Central Command stated that, under Trump's direction, strikes began at 4:45 PM Eastern Time on the 13th. The command asserted the operations would continue to impose heavy costs on Iran's armed forces and degrade their ability to attack innocent civilians and commercial shipping in the Strait of Hormuz.

In response, the Iranian military announced that it had deployed suicide drones several hours prior to strike US forces stationed in Kuwait, targeting communication systems, fuel storage, Patriot air defense systems, control towers, and ammunition depots. Additionally, the Iranian navy launched cruise missiles against US warships in retaliation for US missile strikes on Iranian military facilities. The Iranian military stated that its defensive strikes would be adjusted based on the severity of enemy aggression and would continue forcefully.

International Oil Prices Surge, Fed Rate Hike Expectations Intensify

Against the backdrop of escalating US-Iran conflict, international oil prices have surged dramatically, reigniting market expectations for Federal Reserve interest rate hikes.

At the close of the morning session, WTI crude oil futures surged 9.42% to $78.14 per barrel. Brent crude oil futures jumped 9.59% to $83.30 per barrel.

Market expectations for a Fed rate hike have subsequently heated up. Swap market data now shows traders have almost fully priced in a rate hike for September, compared to a probability of around 66% just a week ago.

Precious metals prices fell sharply. Spot gold closed down 1.99%, while spot silver fell 2.18%. COMEX gold futures dropped 2.55%, and COMEX silver futures declined 3.63%.

Hebe Chen, an analyst at Vantage Markets in Melbourne, noted that reignited geopolitical tensions have hit an already fragile precious metals market again. Unless there is a substantive easing in the Strait of Hormuz situation, high oil prices, strong yields, and a firm US dollar will continue to pressure gold prices this week.

In a separate development, a prominent Fed commentator suggested in a recent article that some colleagues of Fed Chair Jerome Powell are growing more concerned about inflation and may push to discuss rate hikes at the Fed's upcoming meeting. Powell will have the opportunity to guide this consensus when he testifies before Congress this week, armed with the latest June inflation data—the last major release before the meeting.

Furthermore, recent research from Goldman Sachs indicates that the US is likely to be the first hit by a potential global inflation wave triggered by artificial intelligence.

Analyst Views: Short-Term Oil Prices May Remain Strong

An industrial products analyst from Huishang Futures, Huang Chen, stated that over the weekend, US-Iran tensions escalated rapidly, leading to the Strait of Hormuz being closed again. Data from Windward Maritime Analysis shows traffic through the strait plummeted from 43 vessels on July 8th to just 17 by the 12th. More notably, a US military strike in the early hours of July 13th targeted Iran's largest petrochemical center. Damage to this facility could further threaten Iran's energy and chemical export capacity.

"Currently, the bullish factors for the crude oil market are still concentrated on the geopolitical situation, but the core driver has shifted to fundamentals," said Gao Jian, a senior analyst at Qisheng Futures. He explained that the ultimate support from geopolitical risk to prices depends on whether it causes a substantive impact on crude supply. While this round of US-Iran conflict is large-scale and frequent, its impact on the Strait of Hormuz is more of a short-term disruption. If the conflict triggers extreme retaliation from Iran and the US re-blocks Iran's maritime oil export channels, a new round of supply shortages could emerge, potentially driving sustained oil price increases. If it remains merely short-term friction, any price rebound would be temporary.

From a fundamental perspective, EIA data showed a 3 million barrel increase in US commercial crude inventories to 411.4 million barrels. However, there was significant drawdown in refined products, with distillate stocks falling by 4.98 million barrels and gasoline inventories dropping by 1.904 million barrels, indicating resilient refinery demand with end consumption not significantly contracting despite high prices.

Huang Chen added that domestic liquid chemical port inventories in China (excluding oil products) have fallen to 1.07 million tons, an extremely low level for this time of year historically. This suggests a relatively smooth transmission of raw material costs to downstream chemical products, indirectly bolstering crude oil demand expectations.

Looking ahead, Gao Jian believes the current market state of "short dominance, long absence" is not conducive to the crude oil futures market starting a new unilateral trend, and investors should be wary of pullback risks during any shift in market sentiment.

"Overall, the probability of geopolitical risks heating up is currently significantly greater than the probability of them cooling down, suggesting oil prices may remain strong in the short term. Subsequent focus should be on the Strait of Hormuz navigation situation, the actual extent of damage to Iranian energy/chemical facilities, and the pace of US Strategic Petroleum Reserve releases," Huang Chen advised.