Recently, I've been paying close attention to the developments in the US-Iran situation and found that this conflict's impact on the global markets is much deeper than it appears on the surface. Last week, the US and Iran held their highest-level negotiations in Pakistan since 1979, but ultimately, the talks broke down, and the US immediately announced a comprehensive maritime blockade against Iran. This caused some chaos in the markets.

Energy prices immediately reflected the market's tense sentiment. WTI crude oil surged over 10% after the negotiations collapsed, breaking through the $100 mark. Gold also declined, falling below 4700. Bitcoin dropped 2.58% to over 77K, while Ethereum's decline was even larger, approaching 3%. Honestly, this geopolitical shock has a pretty noticeable impact on the crypto markets.

What’s more worth noting is the US inflation data. March CPI increased by 0.9% month-over-month, the largest single-month rise since June 2022, with gasoline prices hitting a record not seen since 1967. Although core CPI rose only 0.2% MoM, below expectations, the lingering effects of energy shocks may become evident in the coming months. The US 10-year Treasury yield is around 4.31%, reflecting market pricing for inflation and geopolitical risks.

The data on consumer confidence is even more alarming. The University of Michigan survey shows that the initial April consumer confidence index plummeted to 47.6, a new historic low, down 10.7% from March. Respondents expect prices to rise by 4.8% over the next year, an increase of one percentage point from March. Long-term inflation expectations also rose from 3.2% to 3.4%. What does this indicate? Consumers are starting to worry about persistent inflation.

Interestingly, the performance of the three major US stock indices has been somewhat inconsistent. The Dow fell 0.56%, the Nasdaq rose 0.35%, and the S&P 500 also increased by 0.35%. The semiconductor sector even gained 2.31%. This divergence reflects the market’s search for safe havens—tech and growth stocks are still attracting capital. The rise in the US 10-year Treasury yield also suggests that market expectations for future economic growth are adjusting.

I’ve noticed several noteworthy trends. First, the military has entered a high alert state, preparing to resume military actions against Iran. Second, Iran has initiated a reconstruction plan for its oil facilities, aiming to restore 80% of capacity within two months. This suggests that energy market uncertainties may persist for some time. Third, the Bank of Japan is considering raising interest rates to counter inflation pressures, which could further push up the US 10-year Treasury yield.

From a market perspective, this geopolitical shock has exposed the fragility of the global economy’s energy supply chain. The IMF has already indicated it will lower its global growth forecasts, with the extent depending on the duration of the war and the pace of economic recovery. In the short term, safe-haven assets like energy and gold may continue to perform, but the direction of the crypto market still depends on macro liquidity and risk sentiment. If the conflict escalates, risk aversion will further push up US bond yields, which is not good news for stocks and crypto markets.