The market has indeed been quite interesting this past week. The tension in geopolitical situations is directly reflected in the commodity markets, with increased volatility in oil and bulk commodities, while US stocks have actually risen against the trend—both the Nasdaq and S&P 500 have posted four consecutive gains, up 0.54% and 0.44% respectively. The logic behind this is actually worth pondering.

First, let's talk about the geopolitical side. Trump set a final deadline for Iran; there have been some developments in negotiations, Pakistan proposed a ceasefire plan, and Iran also put forward ten suggestions. Interestingly, Iran proposed opening the Hormuz Strait but wanted to collect transit fees—about $2 million per ship—and split the revenue with Oman. Trump responded directly by saying the US should collect fees if they win. This back-and-forth has the market betting on whether negotiations can succeed.

From an energy supply perspective, the number of ships passing through the Hormuz Strait has risen to the highest since early March, indicating market expectations for the reopening of the passage. But there's a problem—OPEC+ has agreed in principle to increase production by 206k barrels per day in May. Sounds good, but in reality, this is a typical paper promise. Major oil-producing countries like Saudi Arabia, the UAE, Kuwait, and Iraq are unable to increase output due to the war, and Russia is also constrained by sanctions and infrastructure damage from the Ukraine war. So, while the production increase quotas look promising, actual implementation depends on the complete reopening of the Hormuz Strait, and even if it reopens, energy infrastructure repairs will take months.

This has clear implications for inflation and interest rates. JPMorgan Chase CEO Jamie Dimon has already issued a warning—continued volatility in oil and commodities could push inflation higher, and ultimately interest rates might rise above market expectations. In March, the US service sector price index surged to 70.7, the highest since October 2022, with a monthly increase of 7.7 percentage points, the largest in nearly 14 years. Corporate cost pressures are indeed significant.

However, employment data has been surprisingly strong. In March, non-farm payrolls increased by 178k, far exceeding the expected 65k, and the unemployment rate dropped to 4.3%. This reflects that, despite the outbreak of war, the labor market remains stable. The healthcare sector led the growth, with all industries generally expanding.

On the stock market side, storage chip stocks are rising, with Seagate up over 5%, Micron, Western Digital, and Sandisk up over 3%. Google rose over 1%, while Tesla fell over 2%. In cryptocurrencies, Bitcoin is currently at $76.75k, down 1.60% in 24 hours; Ethereum is at $2.28k, down 2.92%.

WTI crude oil rose 0.49% to $112.60 per barrel, gold fell 0.59% to $4,649.3 per ounce. In the bond market, the US 10-year Treasury yield is around 4.33%, up 3 basis points.

Overall, the market is betting on geopolitical negotiations while digesting the impact of rising energy costs on inflation and interest rates. The short-term implementation of those promises of increased production remains uncertain; the key still depends on whether the Hormuz Strait can truly resume normal passage. The market volatility this week is likely to continue, so it’s worth paying close attention.