On Monday (August 17), Middle East news repeatedly dominated the market. News of the approval of the 60-day extension of the US-Iran agreement caused a short-term plunge in crude oil prices, with Brent and WTI crude falling rapidly; however, Trump's threats against Oman kept supply concerns in the Strait of Hormuz hanging in the balance. Gold fluctuated at high levels amid safe-haven demand and a weaker dollar, while Japanese bond yields hit a 30-year high, with the market betting on a September rate hike by the Bank of Japan. Overall risk sentiment oscillated rapidly between escalation and easing. Today, the market is most concerned about every signal from the Middle East situation. On one hand, there's Trump's tough rhetoric specifically mentioning Oman; on the other hand, there are rumors of the US-Iran agreement being extended, causing oil prices to fluctuate wildly within minutes. For traders, this isn't just simple geopolitical news, but a chain reaction affecting supply chains, insurance rates, inflation expectations, and central bank policies. This article analyzes publicly available information from four dimensions: US Treasury bonds, foreign exchange, gold, and crude oil, highlighting shifts in sentiment and tail risks, helping to understand why the market is currently more sensitive to "news" than "data."

Core Analysis

Middle East news continues to shift: Hormuz remains a key factor affecting oil prices.

After Trump specifically named Oman, the market initially priced in the risk of an escalation in the US-Iran confrontation, causing oil prices to surge briefly. Subsequently, major overseas institutions, citing sources, reported that the 60-day extension of the US-Iran agreement had been approved, causing oil prices to plummet, with both Brent and WTI falling by more than $1. This demonstrates that current crude oil pricing is highly dependent on news. Traffic through the Strait of Hormuz decreased by approximately 19.5% last week and nearly stalled by the weekend, indicating that actual logistical disruptions are still accumulating. Therefore, the decline reflects more of an "easing expectation" than a "supply recovery." If the extension agreement is proven false or new threats emerge, the risk premium could quickly return to normal.

Japanese bond yields hit new highs and the dollar is under pressure: Gold benefits but caution is advised against overcrowding.

The yield on Japan's 10-year government bonds rose to 2.930%, a 30-year high, with the market betting on an nearly 80% probability of a rate hike by the Bank of Japan in September. The stronger yen pressured the dollar index, while non-US currencies remained relatively strong. Meanwhile, most Federal Reserve economists expect interest rates to remain unchanged this year, leaving the dollar lacking momentum for further strengthening. Gold thus benefited from a weaker dollar and geopolitical safe-haven demand, with spot gold prices remaining near two-week highs. Strategists at major overseas institutions reiterated their long-term bullish view on gold, with gold funds seeing inflows of $6.3 billion last week. However, long positions are already crowded, and if geopolitical tensions ease or US Treasury yields rebound, gold prices may experience a rapid correction.

Supply-side vulnerability and tail risks: Easing expectations do not equate to supply recovery

Gas stations in the Moscow region have recovered to two-thirds full operational capacity, a significant improvement from July, but refinery maintenance in September could trigger new shortages. Azerbaijani oil production has declined year-on-year, and Belarusian refined petroleum product exports to Russia face the risk of disruption. These factors provide indirect support for crude oil prices. More concerning is Trump's threat to bomb Oman, though rhetoric-based. Oman is a crucial passageway around the Strait of Hormuz, and escalating conflict could cause shipping insurance and freight rates to soar. The probability of actual military escalation is moderately low, but the tail risk is extremely high. Traders should distinguish between verbal pressure and actual supply disruptions: the former causes short-term volatility, while the latter is more likely to change the trend.

Trend Outlook

In the short term, oil prices remain driven by geopolitical news. If the agreement extension is finalized and there are no new military actions, oil prices may continue to retrace some of the geopolitical premium; however, the low ebb of the Hormuz transit and lingering supply concerns limit the downside potential. Gold is trending upwards with a weaker dollar and safe-haven demand, but a rapid pullback due to overcrowding should be anticipated. A continued rise in Japanese bond yields could indirectly affect gold and the dollar by impacting US Treasury yields through global long-term interest rates. In the medium term, if the stalemate persists, oil prices will likely experience wide-range fluctuations at high levels. Gold will benefit from central bank policies and de-dollarization, but its sensitivity to news will be dulled, requiring confirmation from substantial supply data.

Frequently Asked Questions

Q: Why did the approval of the US-Iran agreement extension cause oil prices to plummet? A: The extension of the agreement means a decrease in the risk of military conflict in the short term, temporarily easing market concerns about supply disruptions in the Strait of Hormuz, and causing crude oil to relinquish some of its geopolitical premium. Q: What does Trump's threat to Oman mean for the market? A: Oman is an important passageway and potential mediator around the Strait of Hormuz. If it gets involved, it could amplify the risk of supply chain disruptions. Currently, it's more of an emotional shock and hasn't resulted in actual supply losses. Q: How does the record high Japanese bond yield affect foreign exchange and gold? A: The market is betting on a September rate hike by the Bank of Japan, and the strengthening yen is suppressing the dollar index, indirectly supporting gold; at the same time, rising global long-term yields may limit the rise in gold prices. Q: Can gold continue to rise? A: Safe-haven demand, a weak dollar, central bank gold purchases, and expectations of interest rate cuts are providing support, but capital inflows are already crowded. If geopolitical tensions ease or US Treasury yields rebound, a rapid correction may occur. Q: What signals should ordinary traders pay attention to? A: The follow-up to the US-Iran agreement, actual data on transits in the Strait of Hormuz, the Fed minutes, statements from the Bank of Japan, and any military escalation rhetoric.