Market Greed Is Back: Oil and the Hormuz Strait Didn’t Get the Memo.

What happened: Geopolitical tensions in the Middle East, particularly around the Strait of Hormuz, have driven oil prices to multi-year highs. On May 13, Iran seized two Greek oil tankers, escalating tensions. This, coupled with OPEC+ production cuts, has tightened global oil supply. On May 16, Brent crude futures touched $105.90, the highest since 2014. Bank of America's Michael Blanch joined Goldman Sachs in predicting $90 Brent crude this year, citing a "pretty large deficit" in global oil supply.

Market impact: Energy stocks have surged. On May 16, June WTI crude oil (CLM26) and June RBOB gasoline (RBM26) closed up 0.64% and 2.05% respectively. Enterprise Products Partners (EPD) and Enbridge (ENB), high-yield energy stocks, are seen as attractive investments in a potential market crash. The CBOE Volatility Index (VIX) rose 2.2% to above 17, indicating increased market uncertainty.

What to watch next: On May 18, the U.S. is expected to announce its decision on Iran's nuclear deal, which could further impact oil prices. On May 25, OPEC+ will meet to review production policy, a key event for oil markets. Technical levels for Brent crude, around $105 and $110, will also be crucial in determining the narrative's trajectory.