Morning Bid: No quiet on the eastern front

• Brent crude topped $87/barrel and WTI exceeded $84/barrel, representing increases of over 20% and 25% respectively for the week and over 40% year-to-date, as the Strait of Hormuz closure has stranded hundreds of tankers
• Asian refineries, which depend on the Middle East for nearly 60% of crude supplies, are reducing operations with diesel crack spreads hitting record highs; South Korea's Kospi index headed for its worst week ever at -10.5%
• President Trump offered mixed responses, suggesting prices will drop when conflict ends while temporarily loosening restrictions on Indian purchases of Russian oil and proposing U.S. Navy escorts to reopen the Strait of Hormuz

Market Summary: Geopolitical Crisis Drives Major Energy Spike

Key Developments:

Joint U.S.-Israeli strikes on Iran killed Supreme Leader Ayatollah Ali Khamenei, triggering regional retaliation and the biggest supply chain disruption since COVID-19. The Strait of Hormuz is essentially closed, stranding hundreds of oil tankers.

Energy Market Impact:

• Brent crude topped $87/barrel; WTI exceeded $84/barrel
• Weekly increases: over 20% (Brent) and 25% (WTI)
• Year-to-date spikes: over 40% for both benchmarks
• Largest weekly gains since Russia's 2022 Ukraine invasion
• Asian LNG prices hit record highs; European gas prices surged

Supply Disruptions:

• Qatar suspended LNG production
• Saudi Arabia halted key refinery operations
• Iraq shut crude production
• Asian refineries (dependent on Middle East for 60% of crude) cutting operations

Policy Response:

President Trump loosened restrictions on Indian purchases of Russian oil and offered U.S. Navy escorts to reopen Strait of Hormuz. Treasury considered Strategic Petroleum Reserve releases but reportedly declined.

Market Performance:

• Equities: South Korea's Kospi headed for worst week since 2020 (~10.5% decline); Asian markets severely impacted; European stocks fell moderately; U.S. markets outperformed due to energy independence
• Currency: Dollar on track for strongest weekly performance, benefiting from safe-haven flows
• Fixed Income: Treasury yields rose as inflation concerns outweighed safety demand
• Gold: Down for the week despite Friday gains

Outlook:

Analysts warn this conflict could reshape global energy security and resource nationalism, particularly critical as AI revolution demands increased energy and materials.