What Happened
Russia and China have vetoed a UN Security Council resolution addressing the Strait of Hormuz, removing the multilateral diplomatic track as a near-term de-escalation mechanism for one of the world's most consequential oil chokepoints, roughly 20% of global seaborne crude transits its 21-mile navigable channel daily.
What Our Data Says
This event lands directly on top of a macro regime that was already under maximum stress. WTI is indicatively at $115.25 and Brent at $97.17, note these two figures carry a 43.8-hour age gap on Brent versus 4.6 hours on WTI, making cross-instrument comparison unreliable; treat both as directionally indicative only. What matters structurally is that oil has already loaded roughly 15% of mechanical CPI pressure into the pipeline over the past month, with the April 10 CPI print now three days away.
Our tracked probability on the Geopolitical Supply Shock >2M bbl/d scenario was 20% before this veto. A UN resolution, even symbolic, functions as a pressure-release valve, it signals that major powers prefer a negotiated status quo over confrontation. That valve is now closed. We are marking this scenario's subjective probability up from 20% to approximately 28-32%, pending further escalation signals from the Strait.
VIX data carries a meaningful caveat: the PriceSnapshot reads 34.54 while the FRED resolver shows 24.17, a 10-point divergence that reflects the 124-hour staleness on the snapshot figure. We cannot claim real-time volatility pricing with confidence. What we can say is that HY spreads at 3.05% (BAMLH0A0HYM2, April 7) remain historically compressed, implying credit markets have not yet priced geopolitical risk into the energy supply chain. That gap between credit complacency and geopolitical reality is a known fragility in the current setup.
Gold at $4,684 (indicative, 4.6h old) with CFTC positioning at only the 17th percentile remains the cleanest asymmetric vehicle in our book. A supply shock scenario drives WTI to $140-165 and gold toward $5,500+ in our model. Even a partial escalation, Hormuz harassment, insurance surcharges, rerouting premiums, mechanically pushes CPI above 3.0% within 60 days, trapping the Fed between a supply-side inflation problem and a 22x P/E equity market sitting on 98th-percentile crowded longs.
What This Means
The veto is not a trigger, it is a probability density shift. It removes the scenario in which multilateral diplomacy caps Hormuz risk before it becomes a supply event. The stagflation deepening thesis (42% base probability) and the supply shock tail (now ~28-32%) together represent roughly 70-74% of our scenario distribution that is bearish for equities and bullish for hard assets. The market, pricing approximately a 55% soft-landing probability via SPX at 6,542 on 22x P/E with real yields at 1.98%, is now even more structurally mispriced relative to our distribution.
US equity markets are closed; after-hours prices are thin and directionally unreliable as positioning signals. Do not read stale SPY or QQQ levels as market reactions to this event.
Positioning Implications
The highest-conviction trade, long gold, short equities, gains an additional tail-risk premium from this event. The thing to watch is the 48-hour window for any US or allied naval response posture change near the Strait: that is the indicator that separates a diplomatic signal from a kinetic escalation, and the latter is what converts the 28-32% tail scenario from probability to price.
Explore these indicators together: Chart Household Financial Obligations Ratio, WTI Crude Oil, and 3 more on the Indicators Dashboard