Trump’s tweet to delay action on Iran’s infrastructure didn’t work this time. The world is crossing its fingers that the Iran situation is resolved soon. Energy prices are back on the rise, which has pushed interest rates higher.
Other concerns include actual shortages of key petrochemicals, especially fertilizers, and even industrial gases. Investors are being educated on how many key resources are dominated by production in the Middle East.
Spot WTI hit $97.87/bbl this morning and has only pulled back to just under $97. The August futures contract stands at $85.63, indicating the situation will improve by then, but still at inflationary levels. and gasoline are modestly higher today. It’s clearly a fluid situation.
In other commodities, precious metals have caught a bid with up 3.3% but down 15% in a month, +4.7% (-27% in a month), and slightly in the green (-9.5% in a month). Agricultural commodities are up 0.6%, now up 3.2% in a month (5.6% YTD).
Like the US, most countries are sitting with all-time high debt levels and are rolling over pandemic low yields into much higher rates, resulting in even higher debt levels to finance the higher interest expense.
While it’s difficult to say where stocks may bottom before the Iran situation is resolved, there’s no doubt that when it does, there will be a major relief rally. For now, we are not seeing earnings estimate cuts, no turmoil in the labor market, or major changes in consumer sentiment, though they are starting to weaken. The situation clearly remains volatile for now.