U.S. President Donald Trump on the 13th local time reimposed a blockade of the Strait of Hormuz, a global key logistics artery, sending international oil prices soaring nearly 10% that day. With disruptions to the global energy supply chain, concerns over worldwide inflation are growing again. Experts said the likelihood is high that major Asian stock markets, which rely heavily on crude imports, will stumble sharply again as a surge in oil prices and fears of interest rate hikes hit at once, much like the early days of the Iran war.
According to the Wall Street Journal (WSJ), Bloomberg and other major outlets on the 13th local time, West Texas Intermediate (WTI) crude futures settled at $78.14 per barrel, up 9.4% from the previous transaction day. Brent crude futures, the global oil price benchmark, also jumped 9.6% to $83.30 per barrel. This is the largest one-day gain since May 2020, when prices were recovering from the shock of the COVID-19 pandemic. On the 15th of last month, after a month-long slide on expectations of a memorandum of understanding, international oil prices erased all of the decline in a single day and surged to a record high in a month.
International oil prices spiked immediately after President Trump released that the United States would impose a 20% toll on cargo transiting the Strait of Hormuz. Energy intelligence firm Gelber & Associates said in a report, "President Trump declared the resumption of a maritime blockade against Iran and retaliatory strikes, and concerns over a sharp drop in ship traffic through the Strait of Hormuz have combined to heighten short-term crude supply fears." Henry Hoffman, co-portfolio manager at the Catalyst Energy Infrastructure Fund, also said, "From the outset, the market was too quick to judge that 'the war crisis is over' on the basis of a partial reopening."
There is also a significant shortage of global crude safety nets to cushion the market shock. As the Trump administration has released large volumes from the Strategic Petroleum Reserve (SPR) to defend prices, U.S. government crude inventories have fallen to 316.5 million barrels, the lowest since 1983. With even the U.S. government's capacity for market intervention limited, the damage to the global economy ahead could grow even larger.
Rising energy prices act as immediate inflationary pressure. Global investor sentiment, worried about inflation-driven rate hikes, froze quickly. As expectations grew that the U.S. Federal Reserve could raise rates again to tame prices, risk-asset aversion spread on the New York stock market. In particular, SK hynix depository receipts (ADR), an artificial intelligence (AI) semiconductor-related stock, plunged 9.3%, triggering heavy selling in areas that had previously seen large capital inflows.
Wall Street experts said jitters in financial markets, centered on Asian equities, are likely to persist for the time being. Paul Christopher, a strategist at Wells Fargo Investment Institute, said, "Unless conditions in the Strait of Hormuz change, oil prices, expected inflation and interest rates will move higher," adding, "That will induce volatility in the stock market." By contrast, Sonu Varghese, a strategist at the Carson Group, said, "Uncertainty in the Middle East continues, but when the full earnings season begins, the AI boom will lead the market again."