SPEAKER_01 0:00

Global markets are waking up to a massive interconnected chain reaction today. Welcome to today's deep dive for July 22nd. Uh we are mapping out exactly how a single catalyst in the Middle East is just, well, rapidly repricing every major asset class on the planet.

SPEAKER_00 0:16

Yeah, it really is a masterclass in market mechanics because, you know, when one foundational element shifts, the shock waves travel through the entire global economy almost instantly.

SPEAKER_01 0:26

Right. And today's insights actually come directly from a pre-market briefing by Eli Levy of Canon Trading Company. Uh you can reach him at Eli at Canon Trading.com. But he laid out this incredibly clear cause and effect scenario, starting with the geopolitical catalyst, which is the whitening conflict between the U.S. and Iran.

SPEAKER_00 0:43

Exactly. And after eleven straight nights of strikes, Iran has declared the Strait of Hormuz completely closed.

SPEAKER_01 0:49

Which is just a huge deal. But before we dive into the math on that, we do have a mandatory piece of housekeeping to get out of the way. Disclaimer: Trading futures, options on futures, and retail off-exchange foreign currency transactions and other financial instruments involve a substantial risk of loss and are not suitable for all investors. Past performance is not indicative of future results. Carefully consider if trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.

SPEAKER_00 1:24

Right. So getting back to Hormuz, the pricing mechanism reacts immediately because, well, roughly 20% of the world's oil flows through that exact choke point. The market isn't waiting around to see what happens.

SPEAKER_01 1:35

No, it just prices in the immediate threat of a massive supply shock.

SPEAKER_00 1:38

Exactly. So you're seeing West Texas intermediate crude spiking past 84 bucks a barrel, and Brent crude is pushing 92. I mean, Goldman Sachs is even warning that if this straight stays closed, Brent could top $120.

SPEAKER_01 1:51

Oh wow. It's basically the global economy's windpipe getting squeezed. But wait, OPEC Plus did just confirm an August output hike, right? Like roughly $188,000 barrels a day. Is that enough to offset this squeeze?

SPEAKER_00 2:05

Honestly, no. Mathematically, that is like trying to put out a house fire with a garden hose.

SPEAKER_01 2:11

That is the perfect way to look at it.

SPEAKER_00 2:12

Yeah, the sheer volume threatened at Hormuz completely dwarfs the trickle of new supply from OPEC. The geopolitical fear premium is just easily winning out because markets focus on the immediate systemic risk.

SPEAKER_01 2:24

Gotcha. And that threat to the energy supply is already bleeding into every other asset class. With oil skyrocketing, the real pain actually ships away from the gas pump and lands directly onto the Federal Reserve. Trevor Burrus, Jr.

SPEAKER_00 2:35

Right. Because energy costs bleed into transport, manufacturing, I mean literally everything. Trevor Burrus, Jr.

SPEAKER_01 2:40

And that revives inflation fears immediately.

SPEAKER_00 2:43

Yeah, you can see it in treasury yields today, with the 10-year note just hitting a two-month high. And the shift in Fed expectations is drastic. A September rate cut is completely dead, and markets are now pricing in a 70% chance of a rate hike.

SPEAKER_01 2:55

Wait, isn't the market severely overreacting here? I mean, we are pivoting from a rate cut to a rate hike based on a geopolitical shock that theoretically could be resolved by next Friday.

SPEAKER_00 3:07

Aaron Powell I mean, it sounds like an overreaction for sure, but you have to look at the mechanics of the yield curve, like how the market prices interest rates over time. Aaron Powell Right.

SPEAKER_01 3:15

So they have to price in the worst case scenario.

SPEAKER_00 3:18

Yeah, the entire curve and the US dollar are taking their cue from this hawkish pivot. The Fed is basically forced to act as if oil will stay high to prevent a secondary inflation spike. They have to keep rates restrictive, you know, just in case.

SPEAKER_01 3:32

And those rising rates start breaking things downstream. I mean, look at the currency market. The yen just plummeted to a four-decade low.

SPEAKER_00 3:39

Right, because the Bank of Japan is keeping their policy loose while the Fed is forced to stay aggressive.

SPEAKER_01 3:44

That widening policy gap is just wrecking the yen.

SPEAKER_00 3:47

It really is. And you see a similar tension creating paralysis in the gold market, too. Gold is stuck between $4,080 and $4,120. It's caught between investors buying it out of panic over the Middle East and others selling it.

SPEAKER_01 4:02

Selling because those rising real yields, like interest rates adjusted for inflation, make holding cash more attractive than holding gold.

SPEAKER_00 4:10

Exactly. But meanwhile, silver is completely decoupling from this macro story.

SPEAKER_01 4:16

Yeah, it is surging toward $59 an ounce. But that isn't even about inflation.

SPEAKER_00 4:20

No, not at all. We are looking at a massive multi-year physical shortage coming out of mines in Mexico and Peru. Silver is being driven by its own fundamental supply deficit.

SPEAKER_01 4:30

Oh wow. And copper is doing something similar, right? Sitting strong at around $6.42.

SPEAKER_00 4:36

Yeah. Largely fueled by the Trump administration, 50% import tariff, which is artificially widening the premium for U.S. prices. But when you step back and look at the broader market, the causality is incredibly clear.

SPEAKER_01 4:48

Right. Geopolitics drives oil, oil drives inflation, and inflation forces a total repricing of the dollar in interest rates.

SPEAKER_00 4:55

It is a textbook chain reaction.

SPEAKER_01 4:57

So as you watch the boards today, keep an eye on the EIA petroleum report dropping at 10 30 a.m. Eastern. In a crude market this hypersensitive to supply, could one modest data point completely reset the tape before lunch?

SPEAKER_00 5:10

It is definitely the thing to watch.

SPEAKER_01 5:12

We will leave you with that to chew on. And as promised, one final piece of housekeeping, disclaimer. Trading futures, options on futures, and retail off-exchange foreign currency transactions and other financial instruments involve substantial risk of loss and are not suitable for all investors. Past performance is not indicative of future results. Carefully consider if trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.