WS #14146

The dominant market narrative remains the US-Iran conflict and the Strait of Hormuz closure, which is showing signs of escalation rather than de-escalation. Iran's foreign ministry stated that full security in Hormuz is contingent on an end to the US naval blockade and compensation for violations, while a separate report indicates tanker traffic through the strait has dwindled to only five crossings on Wednesday and nine on Thursday, down from a monthly average of 12 and pre-war levels of over 130 vessels per day. This sustained disruption continues to pressure global oil supply, with Brent crude consolidating between $83 and $91 per barrel, and US refineries running at full capacity with record profits. The US SPR has fallen below 300 million barrels for the first time since the 1980s, with experts warning of cavern damage and the reserve potentially never being resurrected, undermining the counter-signal that the SPR drawdown provided. Additionally, the US carrier USS Abraham Lincoln is leaving the Middle East after a failed mission, and Senator Chris Murphy has called the war 'disastrous and unwinnable,' indicating a potential shift in US posture but no immediate resolution. This environment continues to favor energy stocks (XOM, CVX, XLE) and refiners (MPC, PSX, VLO) while pressuring airlines (DAL, UAL, AAL) and shipping (MATX, ZIM). The inflation report showing 3.4% CPI with limited pass-through from oil prices provides some relief, but the Fed remains divided on rate hikes, with a 9-3 vote to hold rates at 3.6%.