SPEAKER_01 0:00

So if you look at a map of the Middle East, right between Oman and Iran, there is this uh tiny strip of water called the Strait of Hormuz.

SPEAKER_00 0:08

Right. It's a massive global choke point.

SPEAKER_01 0:10

Exactly. I mean, roughly a fifth of the world's oil flows through there. And when that waterway gets threatened, you feel the shockwave in the entire global economy. It directly dictates, you know, everything from energy costs to your personal mortgage rates.

SPEAKER_00 0:24

Aaron Powell Yeah. And today we are doing a deep dive into the August 5th, 2026 pre-market briefing that is uh authored by Eli Levy of Canon Trading Company. You can actually reach him at elicanonrading.com. But the core of this briefing is just a masterclass in how, well, one single geopolitical headline can completely rewrite the rules for the market. Trevor Burrus, Jr.

SPEAKER_01 0:46

Because we have breaking news that mediators are making real progress on reopening the strait.

SPEAKER_00 0:50

Trevor Burrus, Jr.: Yeah, successfully avoiding major U.S. airstrikes on Iran, which is huge.

SPEAKER_01 0:54

Aaron Powell Right. And that headline alone is actively crushing the market's war premium.

SPEAKER_00 0:58

Aaron Powell Totally. I mean the fear of supply disruption has kept prices artificially inflated for weeks. So when that fear suddenly evaporates, it creates this uh immediate economic cascade across energy and bonds.

SPEAKER_01 1:10

Aaron Powell Which, before we get into how a shipping lane thousands of miles away decides if borrowing money gets cheaper this fall, I have to read this really quickly. 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. So let's look at the aftermath of that Hormuz headline.

SPEAKER_00 1:49

Right, the massive oil drop.

SPEAKER_01 1:50

Yeah. West Texas intermediate crude instantly dropped 5%. It is trading near $75 a barrel right now, and Brent crude slipped below 80%.

SPEAKER_00 1:58

Well, for weeks, the market has been acting like this um massive industrial pressure cooker.

SPEAKER_01 2:04

Oh, for sure. The gauge was deep in the red, steam hissing everywhere.

SPEAKER_00 2:08

Exactly. Everyone was bracing for a supply shock. But this diplomacy news basically flipped the release valve, the tension drops, and you know, so does the price of energy.

SPEAKER_01 2:18

So if cheaper oil is cooling off those sticky inflation fears, that must be taking a massive weight off the bond market.

SPEAKER_00 2:25

It is. The 10-year treasury yield immediately slipped down to 4.63%.

SPEAKER_01 2:30

Wow, that fast.

SPEAKER_00 2:32

Yeah. The math is incredibly straightforward here. If inflation isn't being supercharged by expensive oil, well, the Federal Reserve doesn't have to be as aggressive with interest rates.

SPEAKER_01 2:41

Because just last week, a 4.70% yield on the 10-year was stubbornly holding.

SPEAKER_00 2:46

Right, because several Fed officials still wanted rate hikes this year.

SPEAKER_01 2:50

Wait, so does this sudden release of steam effectively kill the chance of a rate hike at the September Fed meeting?

SPEAKER_00 2:55

Pretty much. The market is now pricing in a hold and drift scenario. The urgency for an immediate hike has uh significantly deflated.

SPEAKER_01 3:03

Okay, but what about gold? Because it is dumping right now since the war fear is gone, retreating swiftly from over $4,130 an ounce down to around $4,070.

SPEAKER_00 3:15

Yeah, a really sharp drop.

SPEAKER_01 3:17

But then Goldman Sachs is still projecting it to hit $5,400 by year end. Like how do those two realities exist at the same time?

SPEAKER_00 3:26

Well, you have to separate the speculative traders from the structural buyers.

SPEAKER_01 3:30

Okay. Meaning what exactly?

SPEAKER_00 3:31

So retail traders are dumping gold because they are less scared today, right? But Goldman's projection is based on central banks structurally buying massive amounts. We are talking roughly 60 tons a month.

SPEAKER_01 3:42

Oh, wow.

SPEAKER_00 3:43

Yeah. That foundational demand does not care about a temporary diplomatic win.

SPEAKER_01 3:46

So if central banks are systematically buying 60 tons a month, does this calm actually end the rally? Or I mean, does it just give these sovereign accounts a massive discount to buy even more?

SPEAKER_00 3:56

That is the exact right question. This dip is likely just shaking out the speculative panic buyers.

SPEAKER_01 4:01

Right, getting them out of the way.

SPEAKER_00 4:03

Exactly. The central banks are almost certainly looking at this price drop as a prime entry point.

SPEAKER_01 4:08

And this shift isn't just about gold, is it? I mean, it's giving governments a window to fix their own currencies. Japan just spent a record $34 billion to support the yen.

SPEAKER_00 4:17

Aaron Powell Which was brilliantly timed, by the way. Because those U.S. Treasury yields slipped on the Hormuz news, the U.S. dollar weakened slightly.

SPEAKER_01 4:25

Ah, so Japan capitalized on that exact moment.

SPEAKER_00 4:28

Yes. They stepped in while the pressure was off the yen to maximize the impact of their $34 billion.

SPEAKER_01 4:33

Trevor Burrus, Jr. That is fascinating. So the big takeaway for you listening is that the market is entirely captive to headlines right now.

SPEAKER_00 4:39

Oh, absolutely. You need to keep an eye on the 10.30 AM Eastern EIA petroleum report today.

SPEAKER_01 4:45

Aaron Powell But more importantly, watch for any news out of those Iran and Oman diplomacy channels, right?

SPEAKER_00 4:50

Trevor Burrus Yeah, because any breakdown in those talks reverses this entire cascade. Oil spikes, yields jump, and that uh that war premium returns violently.

SPEAKER_01 4:59

Aaron Powell Which leaves you with this thought to chew on. If the trajectory of global inflation and the entire US interest rate path are this heavily dictated by a single maritime choke point, well just how fragile is the broader economic outlook heading into 2027? 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.