Six Months Into Hormuz Blockade, Markets Show Surprising Resilience

Six months after the outbreak of the Iran conflict, the Strait of Hormuz remains effectively closed to normal traffic, yet financial markets have shown a resilience that few anticipated. The waterway, which once carried roughly 20% of global energy supplies, has been largely obstructed since late February.

While official claims suggest over 8 million barrels per day are still leaving the Gulf, independent tracking data indicates the real figure is closer to 5 million barrels daily. Asia's weak crude imports in August point toward the lower estimate. Despite this, Brent crude trades under $90 a barrel — well above pre-war levels but far from the triple-digit figures many had feared.

The bigger worry now is refined products. European diesel profit margins are near record highs, and signals from refined product and gas markets suggest tightness could persist into next year.

Diplomatic efforts have shown some signs of life. Iran and Oman report progress on finalizing an agreement over control of the strait, while Qatari officials met with senior Iranian figures in Tehran to discuss normalizing transit. These moves follow U.S. Treasury Secretary Scott Bessent's so-called "economic D-Day," which mostly sanctioned Iranian entities and threatened secondary sanctions on countries that do not sever ties with Tehran.

Elsewhere, the U.S.-Canada trade relationship has deteriorated. A previously settled deal broke down, triggering 50% tariffs on roughly $20 billion of goods, including lumber and dairy. Canada responded with "dollar for dollar" levies, and the White House has threatened 50% tariffs on autos and auto parts starting next year if no new agreement is reached.

On Wall Street, Nvidia's quarterly results beat sky-high expectations, with the chip giant forecasting a 70% revenue surge next fiscal year. Its stock rose nearly 9% even after reports it agreed to pay nearly $13 billion for AI platform Hugging Face. Software firms Salesforce and CrowdStrike also lifted forecasts, adding to equity gains.

Meta Platforms settled lawsuits from U.S. states over children's social media addiction, agreeing to pay up to $18 billion over a decade and impose strict limits on teen use of Facebook and Instagram.

All eyes now turn to Jackson Hole, where the Federal Reserve's annual symposium begins. Central bankers received unwelcome news as July's PCE inflation index came in slightly above expectations. The 10-year Treasury yield hovers around 4.7%. Fed Chair Kevin Warsh faces a delicate moment in his first set-piece speech, after his recent press conference drew criticism over his commitment to the inflation target.