After all, without a concrete resolution to the still-blockaded Strait of Hormuz and a real, long-term guarantee that the conflict won’t escalate further, Markets cannot rally.
Traders need trust to return to persistent buying of already elevated valuations.
Particularly given that Wall Street fiercely held the initial rise in WTI and the US Dollar, it could only be the beginning of much more pain ahead.
Of course, a return to positive sentiment will only be contingent on the conflict not extending much longer, as more disruptions in Oil prices can now be expected to precede a large drag on global economies.
It could be too early to say that inflation effects will actually lead to Central Bank hikes, something that Markets fear like the Boogieman – but even if they don’t, the strain on economies from higher petrol prices amid a still-growing but stagnating economy could be too much to hold for Equity bulls.
At least, Metals are rebounding, with Markets now assuming this pain could get deeper and harsher, triggering the need for some safe havens.
We will know more over the weekend. The way to know more is to watch how Bitcoin moves, as other Markets will be closed. If you see green, a deal could really be drawing.
If you see large red prints, assume that the war could last at least a few more weeks beyond the announced deadline.
Check out our recent Bitcoin analysis to learn more on such catalysts and levels of interest.
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