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

What happened: Tensions in the Middle East escalated, particularly around the Strait of Hormuz, a critical chokepoint for global oil exports. This led to a surge in oil prices, with June WTI crude oil (CLM26) jumping 3.18% to $103.43 per barrel on June 14. The CBOE Volatility Index (VIX) also rose 2.2% to above 17, indicating increased market uncertainty. The U.S. is moving to break Iran's influence over the strait, further heightening geopolitical risks. Oil price expectations for 2027 have started to climb due to concerns about the viability of Gulf exports.

Market impact: Energy companies and related sectors are beneficiaries of this narrative. Higher oil prices drive increased profitability for producers like ExxonMobil and Chevron. Meanwhile, oil-consuming industries may face higher input costs, potentially impacting their margins. The risk premium re-introduced into oil prices also benefits energy ETFs and commodity-focused investors.

What to watch next: On June 21, the OPEC+ meeting will decide on production policy, which could influence oil prices. Additionally, any further geopolitical developments in the Middle East, such as changes in U.S.-Iran relations or supply disruptions, will significantly impact this narrative. Lastly, watch for any changes in U.S. energy policy, as the upcoming midterm elections could influence this sector.