SPEAKER_02 0:00

So uh usually markets absorb geopolitical news with a pretty predictable rhythm, right? But overnight it was a totally different story. Welcome to today's deep dive for July 24, 2026.

SPEAKER_01 0:12

Aaron Powell Yeah, definitely a chaotic morning, to say the least.

SPEAKER_02 0:15

Right. Because we are unpacking a massive Middle East oil shock today. And it's basically rewriting expectations for the whole global economy. Oh, and by the way, all of our insights today are sourced directly from this morning's pre-market briefing by Eli Levy at Canon Trading Company.

SPEAKER_01 0:30

Which uh you can actually get from him directly at Eli at Canon Trading.com. It's a really great breakdown of what's happening.

SPEAKER_02 0:35

Yeah, absolutely. But uh before we really dive into how this geopolitical energy shock is going to translate to your borrowing costs, I do need to read this mandatory disclaimer. Disclaimer. Trading futures, options on futures, and retail off-exchange foreign currency transactions and other financial instruments involves 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. Aaron Powell Okay.

SPEAKER_01 1:13

With that out of the way, I mean we should probably look at the actual catalysts here. This uh this wasn't just some random market jitters, you know?

SPEAKER_02 1:19

Trevor Burrus, Jr. No, not at all. I mean, Brink Crude briefly broke $100 a barrel intraday. And like Goldman Sachs is already warning it could top 120 by the fourth quarter if this keeps up.

SPEAKER_01 1:30

Exactly. It's a very specific uh cluster of crises right now. Right. We're seeing those reported U.S. strikes on Iranian targets.

SPEAKER_00 1:38

Right.

SPEAKER_01 1:38

And then you combine that with two Saudi-loaded tankers that completely reverse course in the Red Sea. Aaron Ross Powell, Jr.

SPEAKER_02 1:44

Wow, just totally turned around.

SPEAKER_01 1:45

Yeah, just turned around because of the Houthi threats. So the immediate risk to the oil supply is well, it's entirely skewed to the upside right now. Trevor Burrus, OK.

SPEAKER_02 1:54

So let's unpack this for the listener, because to me it's like it's like an earthquake in the energy sector, but the tsunami is actually hitting the bond market. How does a localized oil spike suddenly threaten like everyday interest rates?

SPEAKER_01 2:07

Aaron Powell Right. Well, it's all about inflation. Inflation acts almost like gravity on bond yields. When oil spikes like this, inflation expectations just shoot right up.

SPEAKER_02 2:16

Aaron Powell Because energy is basically the baseline cost for everything, right?

SPEAKER_01 2:19

Trevor Burrus Exactly. Yes. So bond yields are forced higher to compensate investors for that lost purchasing power. And that's exactly why the 10-year treasury yield just surged to 4.71 percent.

SPEAKER_02 2:30

Aaron Powell Oh, wow. That's high.

SPEAKER_01 2:31

Aaron Powell, which by the way is the highest we've seen since January 2025. It's a massive move.

SPEAKER_02 2:36

Aaron Powell Right. But those rising yields are really only half the story here because you also have these unexpectedly hot jobless claims today, right? Just 187,000.

SPEAKER_01 2:45

Aaron Powell Yeah, super resilient labor market.

SPEAKER_02 2:47

Aaron Powell So combining that with this massive oil shock, I mean, the Fed can't possibly cut rates next week, can they?

SPEAKER_01 2:54

Aaron Powell Well, here is the massive plot twist. They might actually have to hike. The market is now pricing in a 36% chance of a Fed rate hike next week.

SPEAKER_02 3:05

Wait, really? A hike?

SPEAKER_01 3:07

Yeah. I mean, just yesterday the entire conversation was about when they were going to start cutting, and now everything is completely flipped.

SPEAKER_02 3:12

Okay, but here's where it gets really interesting to me. Shouldn't a global war scare, you know, combined with all these inflation fears, shouldn't that drive investors straight into safe havens? Why did gold actually fall nearly 2% today down to around $4,050?

SPEAKER_01 3:28

It it seems super counterintuitive, right? But you have to look at the mechanics of yield. Right. Yes, gold is traditionally your safe room during a geopolitical crisis. But gold doesn't pay any interest. So when treasury yields shoot up as fast as they just did, and the US dollar strengthens right alongside them, investors just want that guaranteed return.

SPEAKER_02 3:47

Oh, I see. So that higher yield just completely overwhelms gold's traditional safe haven appeal.

SPEAKER_01 3:53

Precisely. Capital flow is where it's treated best, you know. And it's actually the exact same dynamic that's crushing the Japanese yen right now, too.

SPEAKER_02 4:01

Right, pushing it near a 40-year low, if I remember correctly.

SPEAKER_01 4:04

Yeah, 40-year low. Because Japan's interest rates are so low, investors are just yanking their money out of the yen and parking it in US dollars to capture that 4.71% treasury yield. The rate gap is just too wide now.

SPEAKER_02 4:18

Wow. So we are watching a regional supply disruption basically bleed straight into US interest rates and the dollar. And it's fundamentally flipping the Fed's playbook from these anticipated cuts to a live debate about hikes. It really makes you wonder, you know, if a couple of tankers turning around in the Red Sea can instantly erase months of foundational economic assumptions, how fragile are the models propping up our global financial markets today?

SPEAKER_00 4:42

That is the big question. And on that note, I have to read this too. Disclaimer. Trading futures, options on futures, and retail off-exchange foreign currency transactions, 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.