#USIranWarCloudsGather

The Ceasefire is Over, but talks continue: Iran-US tensions are in a bizarre, unprecedented geopolitical paradox right now The Islamic Republic of Iran has asked us to continue talks. We have agreed to do so. But the United States has stated to them, in no uncertain terms, that the Cease Fire is OVER. - Donald J.

Trump This quote summarizes a truly bizarre paradox that the US and Iran find themselves in, whereby the two countries are simultaneously carrying out active military strikes while engaging in active peace negotiations.

This statement perfectly captures the surreal situation we are witnessing: talks going on; the ceasefire terminated; the strikes temporarily halted (Trump did not order additional strikes on Thursday), but with 1,000 missiles "locked and loaded" to respond should Iran attempt an assassination. The diplomatic apparatus is working discreetly behind the scenes. Negotiators from Qatar visited Tehran yesterday for direct meetings. Foreign Minister Araghchi of Iran is en route to Muscat for talks on the Strait of Hormuz.

The Prime Minister of Pakistan engaged in a phone call with the President of Iran.

Numerous back channels are being activated by mediators, while both countries maintain strong public positions. It’s not a complete breakdown; it is coercive diplomacy. “This conflict will never end with Iran’s surrender,” declared Ghalibaf, the lead negotiator of Iran.

Iran entered these talks after having absorbed devastating strikes that killed Supreme Leader Khamenei in February-the most significant strike on Iranian leadership in the history of the regime. Khamenei’s successor, Supreme Leader Mojtaba Khamenei, has not made public appearances since assuming the post. At Khamenei’s funeral yesterday, Araghchi, the Iranian Foreign Minister, faced physical assault from regime sympathizers against any ceasefire, highlighting the domestic political constraints on Iranian negotiators.

A government cannot appear to surrender yet, while also needing the economic boost that the reopening of Hormuz traffic would provide, is in a tough negotiating situation.

The Strait of Hormuz provides the clearest view of the situation. Prior to the conflict, the average daily transit was around 110 vessels. Following the June 17 MOU ceasefire, traffic partially recovered but has recently dropped to about 15 vessels per day (13.6% of the pre-war level) after renewed strikes. This disruption to the global energy supply chain over five months, resulting in documented Asian fuel shortages and a cost of $113.3 billion for the US, offers strong incentives for both sides to reach a resolution, if political barriers permit.

Crypto has experienced significant, though not catastrophic, impacts from these geopolitical developments.

Bitcoin (BTC) remains resilient, trading around $62,000 to $63,000, supported by robust demand at the $59,000 level that we observed earlier this month. However, the increase in oil prices (WTI above $75) coupled with reduced Hormuz traffic threatens to disrupt the narrative of inflation improvement stemming from the NFP and previous crypto rally, as prolonged oil price hikes will likely translate into elevated July CPI data. In the next 72 hours, three main scenarios are likely: 1) Araghchi’s talks in Oman achieve a framework for reopening the Strait of Hormuz.

Trump agrees to hold off on further strikes while talks progress. Oil prices decline toward $70, the economic recovery thesis remains intact, and BTC moves toward $65,000. 2) The Oman talks fail, leading to renewed strikes next week and a continued closure of the Strait of Hormuz.

Oil prices spike toward $85, the July CPI reading shows rising inflation, and renewed fears of interest rate hikes emerge.

3) The current standoff continues for another week with sporadic strikes and ongoing negotiations, keeping oil prices within the $73 to $78 range and BTC consolidated between $60,000 and $64,000. Meanwhile, the CLARITY Act returns to the Senate on July 13, which represents a significant independent upside catalyst for the crypto market this week. So, given the agreement by Trump to continue talks while ending the ceasefire, and Araghchi's trip to Oman for negotiations on Hormuz, will we see a breakthrough this weekend leading to a drop in oil to $70, or will the stalemate continue, prolonging high energy inflation into the July CPI print?

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