The market was slow to react to risk. Stocks fell sharply, with the S&P 500 down 2.5% before a partial recovery as traders cashed in on the panic. Oil prices showed the real story: Brent crude neared $84 before settling near $81.40, and WTI crude rose to about $74.56. This spike, driven by the Strait of Hormuz, wasn't typical.
European gas futures rose 50%, and Asian benchmarks climbed 40%. Supply security now outweighed cost. Tankers near the Strait became key indicators; restricted passage would disrupt global oil and LNG trade.
Investors sought safety in the strengthened US dollar, which hit multi-month highs, while gold was erratic. Holding cash in the reserve currency offered immediate advantage during the downturn.
Sectors diverged: energy stocks held steady, while airlines and transport suffered from higher fuel costs.
The market sentiment shifted. The S&P 500 fell through support levels on high volume, and the VIX rose, suggesting continued volatility. Oil faces resistance at $85-$87; a breach, coupled with Strait tensions, could push prices to $100.
In such times, discipline is key: reduce stock exposure, increase cash holdings, use tighter stop-losses, and employ hedges. The situation, with the Strait as the next chapter, is still developing.
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