On Wednesday (August 19), the US-Iran standoff continued to dominate risk pricing. The passage through the Strait of Hormuz was confirmed to have decreased to 10 vessels, and supply concerns drove crude oil prices up for the fourth consecutive day. Major international institutions reported that Iran was internally discussing striking US targets in Europe and sabotaging undersea cables, fueling safe-haven buying. Iraq sought "special status" for its crude oil exports. Market focus shifted to the FOMC minutes, with interest rate expectations increasingly correlated with the US dollar and gold. Today's market is not driven by data, but by the "actual figures" from the Hormuz referendum and the potential spillover risks from Iran. Behind the continuous rise in crude oil prices, shipping volumes, insurance costs, and alternative routes are rapidly changing. Precious metals are supported by safe-haven demand but suppressed by high US Treasury yields. The US dollar is oscillating between safe-haven demand and interest rate expectations. This article translates publicly available information into language most relevant to traders: Is sentiment overheated? Are risks underestimated? What signals will change current pricing?

Core Analysis

Traffic volume in Hormuz plummets: Supply concerns come under real-time scrutiny.

Shipping tracking data shows that on August 18th, confirmed passage through the Strait of Hormuz dropped to 10 vessels, a 17% decrease from the previous day. Passenger traffic through the Babel-Mandeb line rose to 46, indicating significant diversion. Attacks on bulk carriers resulting in crew deaths have reinforced risk premiums. Crude oil prices rose for the fourth consecutive day, with Brent crude in the $91-92 range and WTI above $85. This is daily high-frequency data, not a long-term outlook. If passage volumes continue to shrink, the supply gap expectation will reinforce itself. Short-term oil price volatility is likely to rise rather than fall, with shipping rates and insurance costs rising in tandem. Attacks on refineries related to the Russia-Ukraine situation provide marginal support for refined oil products, but the impact is limited.

Iran's "European Targets and Cables" Threat: Tail Risk Repricing

Major international organizations report that Iran is considering targeting US objectives in Europe and sabotaging the Strait of Hormuz submarine fiber optic cable should the US escalate the conflict. NATO has stated it is prepared to respond. This information directly boosted safe-haven buying of crude oil and precious metals. While the actual probability of such actions is limited without further US escalation, cable sabotage could instantly disrupt financial communications and trade data flows, representing a low-probability, high-impact scenario. Traders need to distinguish between "news-driven impulses" and "realizable risks." Volatility in the US dollar, Swiss franc, Japanese yen, and gold-related currencies may increase.

Iraq's "Special Status" Diplomacy: A Game of Alternative Supply Paths

The Iraqi and Iranian parliamentary speakers met, calling for "special status" for Iraqi crude oil exports via the Strait of Hormuz. While this appears to be a diplomatic easing, it masks Iraq's underlying anxiety about its over-reliance on a single export route. The Iraqi cabinet has approved a three-month diversified export mechanism, reducing risk from September 1st. If Iraq gains this facilitation, it will be marginally bearish for oil prices; if Iran uses this opportunity to strengthen its control, supply uncertainty will increase rather than decrease. Traders should pay close attention to whether any subsequent agreements can be finalized.

FOMC Minutes and US Treasury Yields: The Ceiling for Gold and the Anchor for the US Dollar

The FOMC July minutes are about to be released. The market is focused on the breadth of discussion among the three dissenting voices advocating for rate hikes. If the minutes are hawkish, US Treasury yields will rise, which will be short-term bearish for gold and support the dollar; if they are neutral to dovish, it will reinforce expectations of a lower probability of rate hikes, easing pressure on gold. Tianli Investment believes the US economy is cooling gradually, rather than slowing sharply. For gold, safe-haven support and high yields will coexist. For the dollar, its safe-haven appeal and interest rate expectations will work together, potentially amplifying volatility. Whether energy prices continue to rise and reignite inflationary pressures will be key to future developments.

Trend Outlook

In the short term, transit data from the Hormuz and statements from the US and Iran remain the dominant variables for oil prices. If transit volume remains low, crude oil volatility will be high. Gold is caught in a tug-of-war between safe-haven demand and US Treasury yields, and may fluctuate before the FOMC minutes. The US dollar is driven by both safe-haven demand and interest rate expectations. In the medium term, the speed of progress on alternative export pathways will determine whether the supply gap can be filled. If substantial diplomatic progress is made, the oil price risk premium may decline; if the stalemate continues, concerns about the supply gap will intensify. The biggest tail risk is an unexpected escalation of the conflict, including the destruction of European targets or power cables. It is necessary to monitor transit data and insurance costs, rather than focusing solely on prices.

Frequently Asked Questions

What does the decrease in passage through the Strait of Hormuz mean for oil prices? Passage has dropped to 10 vessels, diverting to Bab el-Mandeb. Supply concerns have shifted from expectations to high-frequency data. If this continues, the risk premium in oil prices will be difficult to eliminate, and volatility will increase; if it recovers, the premium may be quickly reversed. How significant is the risk of Iran striking European targets or submarine cables? This is a low-probability, high-impact tail risk. Without further escalation from the US, the actual probability of implementation is limited. However, cable damage could instantly impact financial and trade data flows, keeping the market vigilant. How will the FOMC minutes affect gold and the dollar? If the minutes are hawkish, US Treasury yields will rise, putting short-term pressure on gold and supporting the dollar; if they are dovish, the probability of a rate hike will decrease, easing pressure on gold and potentially weakening the dollar. The breadth of divergence is key. Is Iraq seeking "special status" bullish or bearish for oil prices? If granted passage facilitation, it will be marginally bearish; if Iran uses this opportunity to strengthen control, supply uncertainty will increase rather than decrease. We need to observe subsequent agreements, not just statements from a single meeting. What signals should we focus on this week? Daily transit data between the Hormuz and Bab el-Mandeb, further statements from the US and Iran, progress on Iraqi alternative exports, interest rate expectations following the FOMC minutes, and shipping insurance costs. Any news related to European targets or cables will amplify volatility.