WS #11493

The dominant narrative this cycle is the continued de-escalation of the Iran conflict and its deflationary impact on oil prices, which is being reinforced by multiple corroborating sources. OPEC+ has agreed to a further 188,000 bpd output increase for August, the fifth consecutive monthly increase, while Strait of Hormuz shipping continues to recover, with 160 vessels reported in the past week. Brent crude has slipped to near four-month lows at $71.70, and WTI is at $68.38. This oil price decline is acting as a powerful counter-signal to the prevailing inflation/rate-hike thesis, cooling Fed rate hike expectations (now 78% chance of a hold at the July 29 meeting) and boosting risk appetite. The weak US payrolls report (57K vs 115K expected) has further dampened rate hike bets. Asian markets are mostly firmer, with Seoul's KOSPI up 2.45% led by tech, and US futures pointing higher. Gold is steady near two-week highs as the dollar weakens. The Khamenei funeral in Iran is proceeding without new escalatory developments, and US-Iran talks continue, supporting the de-escalation narrative. The key risk remains that the Hormuz recovery is fragile and the US-Iran deal is not yet final.