1️⃣ After Iran attacked Kuwait yesterday, the market once again fluctuated due to the intensifying conflict between the United States and Iran. U.S. stocks, U.S. bonds, gold, silver, and even Bitcoin all declined, while only the dollar and crude oil began to soar again. The current stalemate in the Middle East is putting pressure on both parties. For Iran, the ongoing blockade of the Strait has further exacerbated its economic situation. The long-standing economic sanctions imposed by the United States before the war have already been a significant burden on Iran's economy. Before the 1979 Iranian revolution, the exchange rate was around 70 Iranian rials to 1 U.S. dollar. Since then, the Iranian currency has depreciated by tens of thousands of times. Before the conflict broke out, the exchange rate had reached 1.66 million Iranian rials to 1 U.S. dollar.
2️⃣ On Wednesday, the exchange rate dropped even further to nearly 1.74 million Iranian rials to 1 U.S. dollar. According to data from the International Monetary Fund (IMF), Iran's current inflation rate is 68.9%, and its GDP growth rate is -6.1%. On the other hand, Trump is also under significant pressure. Last night, the yield on ten-year U.S. bonds approached 4.5%, and the yield on thirty-year U.S. bonds once again approached 5%. With the recent rebound in oil prices, market inflation expectations and expectations of interest rate hikes by the Federal Reserve have increased, putting pressure on risk assets.
3️⃣ At the same time, within the United States, there are also efforts being made to counterbalance the Trump administration’s policies towards Iran. Recently, the U.S. House of Representatives voted to limit President Trump’s ability to continue the war against Iran without congressional approval. This measure was passed by a vote of 215 to 208. Under the current circumstances, it will depend on which side possesses greater determination and perseverance to persist until the other side collapses first—that side will ultimately emerge as the victor. #ROO #Web3 #DeFOF
1️⃣ The US-Israel-Iran conflict continues to deteriorate. Regarding the draft MOU previously released by Iranian media, which included the release of frozen assets, lifting the US naval blockade, and easing sanctions, Trump's team immediately called the document "complete fabrication" and urged not to trust Iranian state media. At the Cabinet meeting that day, Trump clearly reiterated, "We are not discussing any easing of sanctions or providing money." No sanctions lifted, no funds, nothing at all. "(No sanctions, no money, no nothing.)" emphasized that the U.S. controls the relevant funds and only considers Iran when it "behaves correctly." Meanwhile, in the early hours today, the U.S. military launched a new round of strikes on Iranian military bases, shooting down multiple Iranian drones. Subsequently, Iran also launched counterattacks against the U.S. Air Force base. The overall market is in a state of heightened panic and tight liquidity; the US dollar is rising while risk assets are falling.
2️⃣ But surprisingly, crude oil prices showed weaker movements. As Iran's greatest trump card at present, the Strait of Hormuz will inevitably be repeatedly used to secure better terms for Iran at the negotiating table. At present, the negotiations between the two sides are not just about Trump wanting to compromise. Hawks within the U.S. have voiced strong opposition to the current draft agreement, believing it undermines the goals previously set by the Trump administration. After months of fighting, the agreement reached is close to the Iran nuclear deal from the Obama era. The so-called American hawks are mainly the Israeli lobby groups. This war was initiated by Israel, and if Israel opposes it, it will be difficult to advance a ceasefire. We believe the market remains overly optimistic about the recovery of Middle Eastern oil supply, and the short-term difficulty of opening the strait will ultimately be reflected in rising oil prices. #ROO #TradFi #Web3
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🔍 Market Watch: Today, oil prices are climbing, the dollar is gaining strength, and U.S. stocks, bonds, gold, and silver are all showing a downward trend. Two major news items are influencing the performance of big asset classes today:
First, at 8:30 PM Beijing time, the U.S. announced that the CPI for April, not seasonally adjusted, rose by 3.8% year-on-year, beating the market expectation of 3.7%, marking the highest level in three years; the core CPI year-on-year is at 2.8%, also above the forecast of 2.7%. The risk of stagflation is rising due to increasing oil prices, and market expectations for a Fed rate cut this year have further decreased. The dollar index has strengthened, putting pressure on various risk assets. According to the Chicago Mercantile Exchange's (CME) FedWatch Tool, the market currently sees nearly a 0% probability for a rate cut this year, while the likelihood of a rate hike has exceeded 30%.
Second, the situation in Iran is deteriorating. Today, Ibrahim Rezaei, spokesperson for the National Security and Foreign Policy Committee of the Iranian Parliament, stated that "one of Iran's options in the face of a new round of attacks may be to enrich uranium to 90%. We will deliberate on this in Parliament." A 90% enrichment level is typically viewed by the international community as reaching weapon-grade standards. Meanwhile, the Islamic Revolutionary Guard Corps (IRGC) has signaled a tougher military stance, stating that Iran has redefined the scope of the Strait of Hormuz and now considers it a larger "combat zone." Previously, the Strait of Hormuz was generally regarded as a body of water about 20 to 30 miles wide. However, under Iran's new definition, its strategic range has expanded to approximately 200 to 300 miles. This new statement is seen as a signal of Iran's intention to extend its control. Just a day earlier, President Trump escalated the conflict again after rejecting a proposal from Iran. This change has further pushed up oil prices and caused renewed panic and liquidity issues in the market, also contributing to the strengthening of the dollar index and pressuring risk assets. The NACHO (Not A Chance Hormuz Opens) trade has become the market's mainstream today.