Bang, bang, bang, the prelude to a big drop

Source: Wall Street Intelligence Circle

Boom—Trump has aimed his guns at Iran, while Iran has set its sights on oil prices.

Although global market volatility has slowed, the general trend remains “crude oil and the US dollar rise, while everything else falls.”

- Brent crude oil once surpassed the $100 mark;

- The US dollar index is only a step away from the 100 level;

- The 10-year US Treasury yield has broken through the 4.20 level.

The development of the situation is more like a prelude to a major crash.

First, Iran launched a new series of attacks on ships in the Persian Gulf, momentarily pushing oil prices back above $100 per barrel. Time is on the side of oil prices; the longer the conflict lasts, the greater the impact on the energy market and the higher the probability of declines in other markets.

Second, the market’s previous concern was the Strait of Hormuz, but today, worries have expanded to the Bab el-Mandeb Strait—a location not yet priced in by the market (both energy chokepoints facing trouble at once), which is the entrance to the Red Sea. If it is also blocked, the route for Middle Eastern oil entering Europe will be interrupted (Houthi forces in Yemen may join the blockade). If the Strait of Hormuz is the “supply gate,” the Bab el-Mandeb Strait is the “delivery lifeline.” Should it become blocked, tankers transporting Middle Eastern oil to Europe must detour around the Cape of Good Hope in Africa, increasing the journey by about 10–14 days. This is not just an oil supply problem—it could trigger a second surge in global container freight rates.

Third, the International Energy Agency gave a staggering figure: this conflict could reduce global oil supply by 8 million barrels per day, the largest supply interruption in history.

Fourth, the war may be entering a new phase—the traditional phase may be over, and harassment warfare is just beginning. US intelligence agencies believe Iran’s leadership remains largely intact, meaning the war will not end soon. That means drone attacks, naval mines, tanker attacks, undersea cable disruptions—these are all low-cost but highly disruptive tactics. This kind of “harassment war” is the most unfavorable for Trump. He needs a quick victory that allows him to quickly declare “mission accomplished,” but Iran is using oil prices and the straits as a “remote defense wall,” trying to drag the conflict into a pre-election inflation cycle that he cannot endure.