What happened
Iran has formally closed the Strait of Hormuz in direct retaliation for a US blockade of its ports, removing roughly 20% of global oil supply from the transit network in a single move. This is not a threat or a negotiating posture; it is an operational closure backed by reported gunfire on tankers, which crosses the line from diplomatic pressure into kinetic disruption of commercial shipping. Brent closed Friday at $97.31 and WTI at $92.46 on the NYMEX, both reflecting a pre-closure world; neither price has moved since because US commodity markets are shut for the weekend and will not trade until Sunday evening. That gap between Friday's close and Monday's open is where the real story lives. The CFTC data already showed WTI short positioning at the 6th percentile, meaning the speculative community was historically net short heading into this event; a forced short-cover on top of a genuine supply shock is a combustible combination. Physical Brent at $97 was already pricing a constrained-but-functioning Hormuz; a full closure with tanker interdiction is a categorically different supply scenario. The prior coverage in this publication flagged Iran re-escalation as a 20% probability tail with a WTI target of $100-115 on a spike; that tail has now arrived. The analytical stance here is blunt: Monday's open is not a question of whether oil gaps up, but of how far the gap runs before physical reality and diplomatic back-channels set a ceiling.
What our data says
The CRAI sits at 74, a risk-on reading that was calibrated before a Hormuz closure was on the table; that number is stale in the most consequential sense. The NVI at 72.5 confirms this story is already consuming maximum narrative bandwidth, which historically compresses the window for orderly repricing. VIX closed Friday at 17.94, a reading that implies roughly 1.1% daily S&P moves; a Hormuz closure with tanker fire is not a 17-VIX event, and the gap between that print and Monday's likely open is the single most important number to watch. Real yields at 1.93% (DFII10) remain below the 2.25% danger zone, keeping the structural gold bid intact even as oil reprices.
What this means
The credit market is the canary here, not equities. HY OAS at 286bp and HYG at $80.50 were already diverging sharply from SPX; an energy supply shock that re-accelerates PCE forces the Fed back into a hawkish posture, which is the specific scenario that breaks the HY spread floor. The bear steepening already in place (10Y at 4.32%, 30Y +10bp over one month) gets a fresh catalyst: oil-driven inflation expectations push the long end higher while growth fears anchor the front end. Gold at $4,817.55 doesn't move until Monday, but the structural case just got a second engine; CB demand is price-insensitive and every spec short is now a forced cover into a supply shock.
Positioning implications
The honest watch-list for Monday: WTI above $100 triggers the PCE re-acceleration scenario (15% probability pre-event, now materially higher) and forces a reassessment of the bond neutral thesis toward 10Y at 4.65-4.80%. If Hormuz closure holds through the week, the credit-equity divergence (HYG -7.3% vs SPY +9.5% over 20 days) resolves faster and more violently than the 2-6 week base case. The question you should be asking isn't whether to buy oil on Monday, it's whether the equity short-squeeze thesis survives a world where the Fed is forced to hike into a growth slowdown.
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