On Friday (August 28), Iran responded strongly to US economic measures, and air traffic control in the Hormuz remains far below pre-conflict levels. Market focus shifted to the first appearance of the Warsh-Jackson Hall elections, with expectations of a hawkish consensus rising. Oil price risk premiums remained high, gold was supported by safe-haven demand and inflation, and long-term US Treasury bonds came under pressure. Trader sentiment oscillated between war premiums and diplomatic easing. This Friday, the market was torn between three forces: Iran signaled an "all or nothing" stance, but the US stated that the Strait of Hormuz was "open"; Warsh's first Jackson Hole speech might not offer forward guidance, but the market believes its path can only lead to a hawkish stance; and energy supply disruptions have persisted for six months, with refined oil price inflation now transmitting to core prices. Traders need to be wary of rapid shifts in sentiment and pay attention to the Chicago PMI and Michigan consumer confidence data.

Core Analysis

Iran's tough stance vs. the US's "approved" agreement: Oil price volatility intensifies.

The Iranian Foreign Ministry hinted that security in the Strait of Hormuz was linked to the US troop withdrawal. A well-known foreign media outlet, citing market communications, reported that US officials stated the Strait was open, to which Iran responded mildly. Traders are facing two completely contradictory signals. Any escalating statements in the short term could quickly push up Brent and WTI crude oil prices, but the "open" news has limited gains. Oil prices may quickly reverse within a wide range. Shipping tracking shows that daily traffic through the Strait of Hormuz remains in the single digits to a dozen or so, and insurance costs are high. Actual physical supply has not recovered, providing support for risk premiums.

Walsh Jackson Hole: No forward guidance, but the path points to hawks

The market widely expects Warsh to refrain from providing traditional forward guidance due to significant internal disagreements within the FOMC and the yet-to-be-released August employment and CPI figures. However, he has historically been an inflation hawk, and with inflation exceeding the target for six consecutive years, building a lasting consensus necessitates aligning with the hawkish camp. Bessant's attempts to lower long-term borrowing costs may prematurely ease financial conditions. If long-term yields are suppressed while inflation remains stubborn, the Fed may need to offset this with a higher federal funds rate. Therefore, if Warsh simply reiterates the priority of the 2% inflation target, traders will interpret this as hawkish, which would be beneficial for the dollar and put pressure on long-term Treasury yields.

Inflation Transmission: From Oil Prices to Core Inflation, and Then to Gold and US Treasuries

The situation in Iran has persisted for six months, with nearly 9 million barrels per day of Middle Eastern exports still disrupted and refinery shutdowns severe. If oil prices continue to break through the upper limit of the recent trading range, the costs of diesel, heating oil, and jet fuel will rise, ultimately pushing up core inflation. In this environment, it will be difficult for long-term US Treasury yields to remain low, and key psychological levels have become the focus of market discussion. Gold is supported by both safe-haven demand and inflation expectations, but if real interest rates rise rapidly due to a hawkish Federal Reserve, it will limit gold price gains. In the foreign exchange market, commodity currencies may be supported by oil prices, but deteriorating risk appetite will drag them down.

Ukraine and Data: Marginal Disturbances and Short-Term Sentiment

Satellite imagery suggests a slight escalation in geopolitical tensions, but these have not yet affected energy infrastructure, limiting the direct impact on crude oil and shipping. The primary concern remains maintaining the safe-haven appeal. Friday's Chicago PMI and Michigan consumer confidence forecasts were lackluster, with inflation expectations remaining high. A surprise weakening in consumer confidence could put short-term downward pressure on the dollar, providing a respite for gold.

Trend Outlook

In the short term, oil prices are in a highly volatile state driven by sentiment; any escalation in Iran or changes in the Strait of Hormuz will trigger a rapid reaction. US long-term Treasury yields face a directional choice around the time of Warsh's speech; if hawkish signals are clear, yields may test recent highs, supporting the dollar. Gold is being pulled by safe-haven demand and real interest rates, and is expected to fluctuate at high levels, potentially attracting bargain hunters, but with limited willingness to chase higher prices. In the long term, if the Strait of Hormuz continues to have limited air traffic, the global oil supply gap will be difficult to fill quickly, and energy inflationary pressures will force the Federal Reserve to maintain a tightening stance, shifting the central level of long-term interest rates upward and putting pressure on risk assets. Gold may benefit from inflation stickiness, but rising real interest rates will limit its upside potential. The foreign exchange market is increasingly divergent, with commodity currencies and safe-haven currencies rotating.

Frequently Asked Questions

Will Iran's tough stance immediately push up oil prices? Possibly in the short term, but the market is also digesting the conciliatory signal from the US that the Strait of Hormuz is now open. Actual navigation is far below pre-war levels, and the risk premium remains. Pay attention to subsequent navigation data and specific upgrade actions. Why is Warsh's speech attracting more attention than before? This is his first Jackson Hole speech since taking office. Although it may not offer forward guidance, the market uses his wording to gauge the Fed's hawkish stance. If he reiterates the 2% target as a priority, it will be seen as hawkish. Why is the opening of the Strait of Hormuz so crucial? Before the war, about 20% of seaborne crude oil passed through this route. Currently, daily navigation is extremely low. If this continues for a long time, global supply will be tight, pushing up oil prices and shipping costs, which will then transmit to inflation. How will energy inflation affect US Treasuries? Rising oil prices push up refined oil and transportation costs, eventually leading to core inflation. If inflation is persistent, the Fed will find it difficult to cut interest rates and may even raise them, putting upward pressure on long-term US Treasury yields. What are the current opportunities and risks for gold? Opportunities arise from geopolitical risk aversion and inflation expectations; risks come from rising real interest rates, especially when Warsh's hawkish stance causes a rapid rise in US Treasury yields, which could put pressure on gold prices.