WS #14147

The dominant narrative remains the US-Iran conflict and Strait of Hormuz closure, which is ESCALATING. Oil prices rallied into the weekend, with Brent settling at $88.52 (+1.67%) and WTI at $82.40 (+1.42%), on new tanker attacks and lack of peace progress. 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. The US Treasury Secretary announced indefinite naval blockade and unprecedented economic isolation measures, while Iran insists full security in Hormuz is contingent on ending the blockade and compensation. This continues to favor energy stocks (XOM, CVX, XLE) and refiners (MPC, PSX, VLO) while pressuring airlines (DAL, UAL, AAL) and shipping (MATX, ZIM). The US carrier USS Abraham Lincoln is leaving the Middle East after a failed mission, and Senator Chris Murphy called the war 'disastrous and unwinnable,' indicating a shift in US posture but no immediate resolution. The SPR has fallen below 300 million barrels, undermining the counter-signal that the SPR drawdown provided. Inflation at 3.4% with limited pass-through from oil prices provides some relief, but the Fed remains divided on rate hikes.