The current market remains highly sensitive to developments in the Iran-Israel conflict, with prices fluctuating in response to changes in the situation.
1. Can Oil Prices Continue to Surge?
Oil prices are a leading indicator of inflation and play a pivotal role in shaping sentiment across the commodities market. As long as oil is not already at an exceptionally high level, a sharp increase in oil prices will inevitably raise concerns about rising production costs, which in turn are passed on to other commodities. At present, unless Iran completely abandons its nuclear ambitions, any easing of the conflict will be gradual, making oil prices more likely to rise than fall.
A critical factor is Iran’s control over the Strait of Hormuz. Should Iran implement a blockade, it would deal a severe blow to global oil transportation, given that one-third of the world’s crude oil trade passes through this chokepoint. A blockade would force the world to accept higher oil prices, impacting everyone. There is a real possibility that Iran, if pushed to the brink, could resort to a short-term blockade as a retaliatory measure. If this occurs, oil prices breaking above $100 is entirely plausible.
From a speculative perspective, shorting oil is extremely risky under these circumstances. It is advisable to refrain from acting hastily and to use trading tools with built-in risk controls.
2. Rising Oil Prices Fuel Commodity Inflation
An increase in oil prices leads to higher costs, which in turn strengthens inflation expectations and creates a self-reinforcing cycle. Currently, some commodities remain at low price levels and have not yet priced in the cost-push inflation that could result from higher oil prices. Investors should pay closer attention to these commodities.
For example, agricultural products like soybeans have upward potential, driven by demand for soybean oil in biodiesel production. Similarly, downstream chemical products in the domestic futures market are closely tied to oil prices. As long as the upward trend in oil prices continues, there is still room for price appreciation in these categories
Regarding U.S. stocks and bonds, the response to the Iran-Israel conflict has been relatively muted. The conflict is geographically distant from the United States, and Iran has not targeted American interests directly. As a result, U.S. equities and bonds are more influenced by expectations for Federal Reserve policy and the outcome of ongoing tariff negotiations, with about one month remaining until the deadline for easing trade tensions. This is currently the biggest factor affecting U.S. stock indices.
U.S. Treasuries continue to trade within a broad range and are currently near the lower end of that range. Although there were reports at the beginning of the month about a large volume of Treasuries maturing at the end of June—which could potentially trigger panic—the current lack of significant volatility suggests the situation is not as dire as feared. The key is to monitor the results of U.S. Treasury auctions. If new debt can be issued to replace maturing bonds, the problem will be less severe. Therefore, it is important to watch the auction results; if they proceed smoothly, U.S. Treasuries may still be worth considering.
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