Oil hits $100 as Hormuz flares and yields climb

Oil sets the agenda

Oil set the agenda this week, and everything else had to answer to it. A fresh round of strikes between the United States and Iran around the Strait of Hormuz, the first direct exchanges since July, pushed WTI crude up 9.4% to close the week just above $100 a barrel. It was not a one-day spike either: crude kept climbing as reports of further attacks on shipping arrived through the week.

Markets took the hint. An oil shock lands hardest on an economy that has not finished with inflation, so bond investors sold and equity buyers stepped back. The US 10-year yield rose 19 basis points to 4.97%, Brent followed WTI higher, and 101 of the 194 markets Kinzan tracks finished the week lower.

Zurich and Sydney feel it most

Stock markets outside the US took the brunt. Switzerland's SMI lost 4.3%, a 3.8σ week against its own habit and the most unusual move of any market on the board, while Australia's ASX 200 and India's Sensex also had their roughest weeks in a while by their own standards. The US got off more lightly: the S&P 500 slipped 0.8% and the Dow 1.6%, while the VIX rose 9%.

Energy was the obvious place to shelter. Chevron and ConocoPhillips both closed the week at their highest levels in Kinzan's four-month window. Chipmakers split down the middle: AMD gained 8.1% and Qualcomm 7.8%, but Nvidia gave up 5.2%.

Metals were the surprise. A war that threatens the world's most important oil route ought to be good for gold, but gold fell 1.5% as rising yields made a metal that pays nothing harder to hold, and palladium lost 5.7%. Copper had the wildest ride: having traded close to record highs, it dropped 4.95% on Thursday alone and finished the week down 1.9%.

Crypto went its own way. Bitcoin lost 3.1%, and the two stocks most tied to it, Strategy and Robinhood, fell 8.3% and 7.8%. Yet the coins Kinzan tracks rose 1.9% on average, carried by a handful of smaller names: Injective gained 19.1% and Polkadot 15.7%.

Wednesday's European wobble

Wednesday was the sharpest session for Europe. The FTSE 100 fell 1.31% and the CAC 40 1.94%, each more than a 3σ move against its own recent volatility, on the same day Swiss stocks had their worst session of the week. Copper's Thursday drop registered 4.6σ. Not every big day was a fall, though: Meta jumped 6.55% on Wednesday, and orange juice futures leapt 15.5% on Friday.

A crowded copper trade

Speculators are leaning hard into copper. By the CFTC's Tuesday snapshot, positioning in copper futures sits at the very top of its own history, which made Thursday's drop all the more painful for the crowd. At the other extreme, natural gas positioning is at the bottom of its range, and the New Zealand dollar is near the top. Futures positioning is a level, not a signal, and all eyes now turn to the Federal Reserve, which meets next week with oil back above $100.