[International Financial Briefing] Trump "Advances Action Through Hormuz"… WTI surges 7.99% · U.S. 10-Year Treasury Yield rises to 4.37%

The United States advances a Strait of Hormuz transit operation, which expands Middle East risk; oil prices surge and interest rates rise at the same time.

According to a report from the International Financial Center on the 4th, amid the United States strengthening military and economic pressure on the Middle East, global financial markets show a mixed pattern of heightened geopolitical tensions alongside solid corporate performance. In particular, the U.S. pushing ahead with a Strait of Hormuz transit operation has intensified conflicts with Iran, while multiple factors—including monetary policy, energy prices, and exchange-rate variables—are acting together, and market volatility is expanding.

First, the core issue is a shift in the U.S. Middle East strategy. President Donald Trump announced the promotion of a “Freedom of Navigation” operation for some non-military vessels to transit the Strait of Hormuz, and warned that any obstruction would be met with a strong response. At the same time, he said his view of the agreement proposal he put forward for Iran is unacceptable, and he kept open the possibility of resuming airstrikes. The U.S. Treasury warned that financial transactions with Iran would face sanctions, and plans to include issues related to China-Iran energy trading in the summit agenda. In response, Iran announced plans to introduce new Strait of Hormuz transit regulations (reportedly a move to impose transit fees), upgrading tensions further. The U.S. also announced additional sanctions on Cuba, with diplomatic conflicts showing signs of widening.

Such geopolitical tensions have affected the entire financial market. Based on weekly data, global markets show a mixed trend: stocks rise (+0.9%), interest rates increase (+7bp), and the U.S. dollar weakens (-0.4%). The U.S. S&P 500 index rose on strong performance centered around technology giants, and Europe’s Stoxx 600 index also rose by 0.2% supported by major corporate earnings. Meanwhile, Japan’s Nikkei index fell slightly (-0.34%); China and South Korea’s stock markets rose by 0.79% and 1.90%, respectively.

In the foreign exchange market, the U.S. Dollar Index fell to 98.16, down 0.38%. The Japanese yen rose 1.5% amid hints of intervention by Japanese authorities. The euro weakened slightly, and the renminbi also depreciated slightly. South Korea’s won against the U.S. dollar was 1477.5 won, up 0.1%, while South Korea’s CDS remained at a stable level.

Regarding interest rates, the yield on U.S. 10-year Treasuries rose to 4.37%, up 7bp. Germany (3.04%, +4bp) and the United Kingdom (4.96%, +5bp) also rose in parallel. This reflects the hawkish interpretation of the April FOMC and inflation concerns triggered by high oil prices. The volatility index (VIX) fell 9.19% to 16.99, while the emerging markets risk indicator (EMBI+) saw no change.

In commodities, oil prices rose particularly sharply. WTI crude oil was quoted at $101.94, up 7.99%. Copper fell 1.58%, while gold fell 2.02%. Although OPEC+ decided to increase output by 188,000 barrels per day starting in June, actual production failed to meet the target; therefore, analysts believe the impact on oil prices is limited.

From the perspective of individual countries’ economic conditions, U.S. April employment growth is expected to slow from the 178,000 increase in March to a range of 62,000 to 73,000. However, the market will likely still interpret this as healthy, and given AI-driven productivity improvements, expectations for rate cuts during the year are likely to remain. Meanwhile, warnings about inflation risks continue within the Federal Reserve. Fed Chair Kashkari said that prolonged Middle East wars could constrain policy responses and noted that it is too early to discuss rate-cut expectations. Republican hardliners emphasized the necessity of addressing national debt.

In Europe, officials from the ECB and the Bank of England mentioned that if high oil prices persist, there is a possibility of rate hikes. They believe that if the upward trend in energy prices cannot be contained, further tightening will be unavoidable. Japanese Finance Minister Murasaki hinted at possible further intervention in the foreign exchange market and emphasized strengthening cooperation with the U.S. China is considering pausing sulfuric acid export measures, which—given that Middle East supply has been disrupted—may impact global metals and fertilizer markets. In fact, sulfuric acid prices have risen from below 1,000 yuan per ton to around 1,800 yuan.

Assessments by foreign media and experts focus on structural changes. Bloomberg analysis suggests that whether countries make AI investments is what determines the differences in growth rates. The U.S., driven by increased data center and intellectual property investment, achieved 2% GDP growth in the first quarter; China also contributed 5% growth through the expansion of AI-related exports. Major European countries recorded only low growth of 0–0.3%, and analysis holds that this exposes insufficient AI competitiveness.

As for the stock market, some analyses argue that the adage “sell in May and go away” may no longer apply. Over the past 10 years, the S&P 500 has averaged gains of more than 7% during the period from May to October, with resilient earnings and economic toughness supporting investor sentiment. However, changes in the Fed leadership and midterm election variables are viewed as sources of uncertainty.

In addition, in Asian emerging markets, spreads on high-credit-rating bonds narrowed to 56bp, the lowest level since 2009. Analysts believe this broadly reflects factors including China’s economic recovery, reduced new issuance, decreased reliance on U.S. assets, and inflows of funds for AI investment.

In the financial system, concerns have also emerged that potential easing of U.S. bank regulation and an expansion in leverage may drive financial risks rather than support the real economy. Analysts point out that loosened capital is more likely to be used for trading or shareholder returns rather than lending, and considering the competitive landscape with non-bank financial institutions, the effect is likely limited.

Moreover, assessments also suggest that expanding internal divisions within the Federal Reserve could further increase market volatility, weaken expectations for U.S. dollar hegemony, affect stability in private credit markets, highlight the importance of consumption in U.S. GDP, expand two-way bets on interest rates, and that Trump’s strategy toward China may undermine allies’ trust.

Overall, the global economy is currently in a complex situation in which Middle East geopolitical risks, rising energy prices, uncertainty in monetary policy, and structural changes centered on AI are all acting at the same time. Although financial markets are supported in the short term by corporate performance and growth expectations, the trend of expanding volatility driven by interest rates, oil prices, and policy variables is likely to persist.