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Blockading the Blockade
Check out our YouTube Channel @BensMarketChat for this week’s comment. Don’t forget to like, subscribe, and tell a friend.
Join our email list to be the first to see these videos every week: https://mailchi.mp/traderoutescapital/giuox24tmg
Risk assets are on a tear despite the oil price increasing thanks to the latest development in the Iran war.
President Trump has instigated a blockade on Iran’s existing blockade of the Straights of Hormuz. That’s a lot of blockading!
But Why?
Last week’s chat with Anthony Scaramucci (head to Ben’s Market Chat on our YouTube channel to watch the full interview) gave us a sneak peak into the logic. China receives 90% of its oil needs from Iran through the Straight. The US needed to prevent Iran from blockading all shipping bar those heading to China to force China to negotiate with Iran.
China is Iran’s paymaster thanks to its oil purchases and as such would have the biggest influence on getting Iran to bend to US’s will. Anthony was spot on on that one.
US banks report this week. The US Banks ETF has been in a funk. The worst performance since 2023. However, Goldman’s report yesterday indicated a strong investment banking fee flow. We would also suggest that a potentially steepening yield curve going forward would play into the hands of the sector as this would imply higher Net Interest Margins (NIMs).
Whilst the Iran war impact on inflation is likely to be negative, the Fed, under a new head appointed by Trump is still keen to reduce rates, be it later than initially anticipated.
Fixed Income investors will not take well to this as concerns of stagflation re-surface. The Fed controls the narrative at the short end of the yield curve but the long end is firmly in the hands of investors.
Investors may well continue to drive rates higher for 10 year treasuries whilst the Fed aims to put a lid on rates at the 2 year maturity.
This means a steepening yield curve implying recession concerns.
Banks generally borrow in the short end and lend on the long. Most mortgages are set at the 10 and 30 year rates. The widening rate horizon improves bank margins but is not great for homebuyers seeking a new mortgage.
After this week’s results, expect a potential bounce back in financials.
Always do your own research or seek the advice of your professional financial advisor.
You can find us on LinkedIn and YouTube, Money Matters, Ben Hakham CEO at Traderoutes Capital.
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By BenCheck out our YouTube Channel @BensMarketChat for this week’s comment. Don’t forget to like, subscribe, and tell a friend.
Join our email list to be the first to see these videos every week: https://mailchi.mp/traderoutescapital/giuox24tmg
Risk assets are on a tear despite the oil price increasing thanks to the latest development in the Iran war.
President Trump has instigated a blockade on Iran’s existing blockade of the Straights of Hormuz. That’s a lot of blockading!
But Why?
Last week’s chat with Anthony Scaramucci (head to Ben’s Market Chat on our YouTube channel to watch the full interview) gave us a sneak peak into the logic. China receives 90% of its oil needs from Iran through the Straight. The US needed to prevent Iran from blockading all shipping bar those heading to China to force China to negotiate with Iran.
China is Iran’s paymaster thanks to its oil purchases and as such would have the biggest influence on getting Iran to bend to US’s will. Anthony was spot on on that one.
US banks report this week. The US Banks ETF has been in a funk. The worst performance since 2023. However, Goldman’s report yesterday indicated a strong investment banking fee flow. We would also suggest that a potentially steepening yield curve going forward would play into the hands of the sector as this would imply higher Net Interest Margins (NIMs).
Whilst the Iran war impact on inflation is likely to be negative, the Fed, under a new head appointed by Trump is still keen to reduce rates, be it later than initially anticipated.
Fixed Income investors will not take well to this as concerns of stagflation re-surface. The Fed controls the narrative at the short end of the yield curve but the long end is firmly in the hands of investors.
Investors may well continue to drive rates higher for 10 year treasuries whilst the Fed aims to put a lid on rates at the 2 year maturity.
This means a steepening yield curve implying recession concerns.
Banks generally borrow in the short end and lend on the long. Most mortgages are set at the 10 and 30 year rates. The widening rate horizon improves bank margins but is not great for homebuyers seeking a new mortgage.
After this week’s results, expect a potential bounce back in financials.
Always do your own research or seek the advice of your professional financial advisor.
You can find us on LinkedIn and YouTube, Money Matters, Ben Hakham CEO at Traderoutes Capital.