Following a volatile week in which President Trump threatened severe escalation of attacks on Iran before declaring a two-week ceasefire, market participants will now focus on crude price’s trajectory this week considering US and Iran ended direct talks in Pakistan without an agreement, putting a fragile ceasefire at risk. To us what matters most is the fact that in spite of Vance being there, there was no agreement. In SoH (Strait of Hormuz) itself, the threat of mines has enabled Iran to keep the price of oil and shipping insurance as high as possible for as long as possible without conducting attacks that would cause the ceasefire to collapse. Iran thinks that the high price of oil and shipping insurance would cause the United States to cave on some of Iran’s demands. Today morning Trump announced that the US would blockade the Strait of Hormuz following the collapse of peace talks with Iran in Islamabad this weekend. This implies a complete stand still for crude physical supplies now. The above further puts upward pressure on crude prices. Hence, it is a matter of time before the paper brent future prices (95-100) match to physical crude prices ($140). In US macro data, there is existing home sales, industrial production, initial jobless claims & Fed's Beige Book. We are also hearing that Kevin Warsh senate ratification process is delayed. An expected Senate hearing on the nomination of Kevin Warsh for Federal Reserve chair has been delayed. This implies Powell continues to be Fed Chair even beyond the 15th May deadline. On US macro outlook, we believe with employment holding up and inflation rearing it’s head again in goods inflation, Fed might be on a long pause till Q3CY26. We still expect an insurance cut of 25 bps in Q4CY26 under Kevin Warsh as Fed chair. We expect Brent to open tomorrow in Asia at $100+ levels and 10yr UST levels to open at 4.36 against Friday’s close of 4.31. We expect US equity futures to open sharply lower by 2%. We are now turning bearish on US equities in both short and medium term. With private equity fears, crude being higher, rates cuts being delayed, employment figures continuously being threatened by AI use, risk assets face a tough time in the coming weeks and months. Dollar should make a comeback as US is net energy exporter. Largest casualty in fx might be JPY, EUR and energy importing EMs.
