Oil prices jumped after reports of three ships on fire in the Gulf of Oman, near the Strait of Hormuz. This incident stirred concerns in the market, causing WTI crude prices to rise from about $71 to $72.15. US Secretary of State Rubio left the G7 meeting early, and Trump planned to depart soon after disagreeing on a joint statement about the Israel-Iran conflict. The People’s Bank of China set the USD/CNY exchange rate at 7.1746, close to the expected rate of 7.1820. Japan’s finance minister, Kato, expressed worries about oil supply and prices but mentioned no immediate discussions with Bessent. Tensions increased when the White House denied any attacks on Iran, and the Chinese embassy in Israel warned its citizens to leave. At first, markets reacted cautiously, causing S&P 500 futures to fall from 6031 to around 6021. However, they bounced back later when a US official clarified that there were no plans to attack Iran. The Bank of Japan is likely to keep interest rates steady while the USD/JPY traded above 145.00. Overall, major currencies remained stable, though the yen saw a significant decline. Recently, we witnessed a brief surge in fears linked to commodities, especially around the Gulf of Oman, where three ships were ablaze near the Strait of Hormuz. This area is crucial, handling about a fifth of the world’s oil supply, so any disruption raises alarms among traders. WTI crude prices reacted quickly, rising nearly $1.20 in a short time, highlighting how political tensions can rapidly impact markets. Rubio’s early exit from the G7, along with Trump’s desire to leave ahead of schedule due to disagreement over the Israel-Iran statement, signals growing diplomatic divides. When key diplomats leave, it often suggests that reaching an agreement is unlikely. This tendency can lead to defensive market moves, as we saw with S&P 500 futures dropping by about 10 points, even though there was a slight recovery after US officials eased concerns about military action. Currency markets remained mostly steady. The yuan’s fixed rate of 7.1746 by the PBOC kept the situation stable, aligning with expectations. There’s no sign of aggressive moves from Beijing, indicating that policymakers prefer to manage expectations without drastic changes. If this approach continues, we might avoid sudden currency shocks for the CNY unless unexpected events occur. The yen, however, faced a significant decline, even as Japan’s central bank is expected to maintain its current stance. Trading above 145.00 against the dollar is a concern for Tokyo officials. Kato noted worries about energy costs but confirmed there were no current discussions about interventions—suggesting that support for the yen is unlikely soon. Without action, the yen will remain under pressure, especially if rising oil prices increase global import costs. We’re also noticing mixed signals during this period—embassies advising evacuations while officials attempt to reassure the public. The Chinese embassy in Tel Aviv urged citizens to leave, and Washington quickly denied any military actions. This kind of situation can create opportunities for strategic positioning, particularly regarding volatility premiums. In conclusion, we’re seeing rising unease in the markets, especially in energy and currencies tied to trade or capital flows. With futures showing some recovery and foreign exchange remaining mostly stable, apart from the yen, this scenario invites targeted exposure to risks, like oil spreads or short-term fluctuations in East Asian currency pairs. It’s important to stay flexible and responsive to ongoing developments.

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