Just experienced a collective surge! Latest developments in the Strait of Hormuz

Asia-Pacific markets rise across the board!

In the early hours of April 7, major stock indexes in the Asia-Pacific region all moved higher. Among them, South Korea’s KOSPI index and Australia’s S&P 200 index both rose by more than 2%, Samsung Electronics surged nearly 5%, and Japan’s Nikkei 225 index rose by more than 0.80%.

European index futures also rose collectively. As of the time of this release, Euro Stoxx 50 index futures were up 0.75%, German DAX index futures were up 0.81%, and UK FTSE index futures were up 0.53%.

Regarding the latest developments in Iran’s situation, according to CCTV News, Iran’s parliamentary National Security and Foreign Policy Committee has begun reviewing a plan for the management and control of the Strait of Hormuz. The spokesperson for Iran’s parliamentary National Security and Foreign Policy Committee said that ensuring that the strategic action plan to secure the Strait of Hormuz and the Persian Gulf is put on the agenda.

A maritime analysis firm in the UK said on the 6th that passage through the Strait of Hormuz has shifted to a “two-channel system,” namely a northern channel controlled by Iran’s Islamic Revolutionary Guard Corps and a new southern channel along the Oman coastline.

Also, according to Xinhua News Agency, Mehdi Mohammadi, an adviser to the speaker of Iran’s parliament, said on social media on the 7th that Iran has clearly already won the war and will only accept such a final-war scenario: consolidating the gains and establishing a new security framework in the region. U.S. President Donald Trump now has only about 20 hours—either he gives in to Iran, or his allies will retreat back to the Stone Age. “We will never back down!”

Japanese and South Korean stock markets surge collectively

In the early hours of April 7, Asia-Pacific markets opened higher and kept going up. As of the time of this release, South Korea’s KOSPI index was up 2.59%, Australia’s S&P 200 index was up 2.03%, and Japan’s Nikkei 225 index was up 0.89%.

For individual stocks, Samsung Electronics rose nearly 5%, and Korean-American Semiconductor, SK hynix, rose by more than 3%. Samsung Electronics’ unaudited preliminary data released on Tuesday showed that in the first quarter its operating profit reached a record 57.2 trillion won (about $38.0 billion), up 755% year over year, far exceeding market expectations. This was the first time Samsung Electronics’ quarterly operating profit exceeded 50 trillion won; it was mainly driven by strong demand from the artificial intelligence industry for high-end storage chips.

In addition, there are reports that after Samsung Electronics raised DRAM contract prices by 100% in the first quarter this year, in the second quarter DRAM contract prices will rise again by another 30% quarter over quarter. Samsung Electronics has confirmed that by the end of March it completed price negotiations with its major customers and signed supply contracts. The 30% increase in DRAM contract prices encompasses HBM required for AI chips, general DRAM needed for PCs, and general DRAM needed for smart phones.

Overnight, all three major U.S. stock indexes rose collectively: the Dow rose 0.36%, the Nasdaq rose 0.54%, and the S&P 500 index rose 0.44%. Chip stocks rose as well, with Micron Technology up more than 3%, and Texas Instruments, Microchip Technology, and Marvell Technology up more than 2%.

Steve Sosnick, Chief Strategist at Interactive Brokers, said, “The market is seeing the ‘carrot’ and also seeing the ‘stick’—on the one hand, there are ceasefire negotiations; on the other hand, bombing continues.” Sosnick said that aside from brief volatility at the beginning of President Trump’s remarks, the overall reaction in U.S. stocks and the oil market has been muted. Investors evidently still hope that hostile actions will not quickly escalate.

Investors are also digesting economic data that came in weaker than expected. In March, the pace of expansion in the U.S. services sector slowed, employment indicators fell by the largest amount since 2023, and input costs accelerated noticeably upward. Kevin Brocks of 22V Research said it is not surprising that the Iran war has weighed on business confidence: “for the Federal Reserve, there is almost no new information here.” Morgan Stanley believes U.S. stocks may be near their bottom and suggested starting to increase holdings, especially in cyclical sectors and high-quality growth stocks.

Meanwhile, there is also new information coming from the Strait of Hormuz. According to CCTV News, on the 6th local time, Ebrahim Raisai, spokesperson for Iran’s parliamentary National Security and Foreign Policy Committee, said that the committee has started reviewing a proposal intended to exercise Iran’s sovereignty and to develop new arrangements and a legal framework for the Strait of Hormuz.

The spokesperson said that at this meeting, the strategic action plan to ensure the safety of the Strait of Hormuz and the Persian Gulf was put on the agenda, and that some parts have already been reviewed and approved. After the National Security and Foreign Policy Committee completes all reviews, the proposal will be submitted to Iran’s parliament for consideration by the full assembly.

Wellwood, a maritime analysis firm headquartered in the UK, said on the 6th that passage through the Strait of Hormuz has shifted to a “two-channel system,” namely a northern channel centered on the control by Iran’s Islamic Revolutionary Guard Corps, and a new southern channel along the Oman coastline.

The company’s analysis report shows that on April 5, a total of 11 vessels crossed the Strait of Hormuz, including 3 entering and 8 departing. All vessels entering were tankers. The vessels departing included tankers and cargo ships. The departing traffic was distributed across two routes: 5 vessels passed through the northern channel, and 3 vessels chose the southern channel.

The report said that the northern channel is still centered on Iran’s Islamic Revolutionary Guard Corps’ control near Larak Island. At the same time, the southern channel formed along the Oman coastline allows vessels to pass outside the original controlled areas. The report believes that the recent evolution of the strait’s passage pattern shows that military control and emerging diplomatic coordination mechanisms are operating in parallel.

Goldman Sachs and JPMorgan issue warnings

As the U.S. and Israel continue their joint military actions against Iran, the key shipping route, the Strait of Hormuz, has effectively entered a blockade state, and many countries will soon face the reality that an oil shortage may become unavoidable.

In its latest report, Goldman Sachs strategist Daan Struyven wrote, “As the last batch of oil tankers that crossed the Strait of Hormuz before the outbreak of war continue arriving at their destinations, concerns about potential oil shortages are intensifying.”

Struyven added, “Our three-party analysis shows that in the Asia region, supplies of petrochemical feedstocks, naphtha, and liquefied petroleum gas are at seriously low levels, and multiple Asian countries will face cross-product shortages in April. The remaining small amount of oil transported through the Strait of Hormuz, alternative import channels, export control measures, and each country’s domestic oil reserves may help mitigate the impact of the strait blockade on gasoline and diesel supply, but the risk of shortages of fuel oil and naphtha remains extremely high, especially in the Asia region.”

Over the past two weeks, oil prices have experienced extreme swings, and recently have surged to their highest level since the start of military action at the end of February.

On Monday of this week, JPMorgan CEO Jamie Dimon warned that the Iran war could trigger shocks in oil and commodity prices, which would keep inflation at a high level and push interest rates above the level currently expected by the market.

Dimon’s warning was issued in his annual letter to shareholders. The day before, U.S. President Donald Trump increased pressure on Iran, threatening that if Iran does not reopen the key waterway, the Strait of Hormuz, he will carry out strikes on its power plants and bridges on Tuesday.

“The challenge facing all of us is enormous,” Dimon added. He listed risks such as the Russia-Ukraine conflict and broader hostile actions in the Middle East. He said, “Now, because of the Iran war, we also face the potential risks of sustained oil and commodity prices possibly swinging sharply, as well as the reshaping of global supply chains—this could make inflation stickier and ultimately keep interest rates higher than what the market currently expects.”

Dimon said that time will tell whether the Iran war can achieve the U.S.’s goals, and he added that nuclear proliferation remains the greatest danger posed by Iran.

Concerns about war-driven inflation have led the market, to a large extent, to rule out the possibility of rate cuts this year. Last year’s monetary easing policy had helped drive the U.S. stock market to historic highs.

On Monday of this week, Federal Reserve officials and Beth Hammack, President of the Federal Reserve Bank of Cleveland, said that if inflation continues to stay above the Fed’s 2% target, then rate hikes may be appropriate. Hammack said she would prefer that officials keep interest rates unchanged “for a considerable period of time.”

Hammack has a vote on monetary policy this year. In January and March, she supported the decision to keep interest rates unchanged.

(Source: China Securities Journal)