What Happened
Rescuers are searching for survivors after strikes, attributed to US-Israeli action, hit residential areas inside Iran. This is not a proxy engagement or a strike on Iranian-backed forces abroad; this is direct kinetic action on Iranian soil, a threshold that materially alters the probability distribution around Hormuz disruption and broader Gulf conflict.
What Our Data Says
The macro backdrop was already primed for this shock. WTI was consolidating at $111.71 (stale as of ~11:10 AM ET, treat as indicative) after a +15.3% one-month move, a market that had already begun pricing a supply-risk premium. Brent at $97.17 is a 19.3-hour-old figure and likely stale in a meaningful way given tonight's event; the WTI/Brent spread relationship itself may have shifted. Do not treat either number as reflecting current session pricing.
Gold at $4,694 (also 5.2 hours stale) was already confirming 46 consecutive cycles of bullish thesis health, with CFTC positioning at the 17th percentile, structurally under-owned despite all-time highs. The absence of sellers at record levels, now juxtaposed against a genuine escalation event, reinforces the asymmetry. Bitcoin, the one live price we have confidence in, sits at $69,830, stable, which is consistent with its recent pattern of not repricing on geopolitical headlines until secondary liquidity effects manifest.
VIX carries a critical data problem tonight: the PriceSnapshot reads 34.54 while the FRED daily close is 23.87, a significant divergence of nearly 11 points. We cannot construct a narrative around either number with confidence. What we can say is that HY OAS at 313bp (FRED daily, April 6) and IG spreads at 86bp suggest credit markets had not yet priced a hard escalation scenario entering today.
What This Means
This event does not change the stagflation thesis, it accelerates it. The inflation pass-through pipeline we identified (PPI +0.7% 3M accelerating, 5Y breakeven +5bp, energy not yet in published CPI) now has a harder catalyst. If Hormuz transit is threatened or Iranian retaliatory strikes hit Gulf infrastructure, the energy-to-CPI pipeline compresses from months to weeks. The Fed's already-impossible task, arithmetically blocked from cutting with WTI above $100, becomes a political crisis if oil spikes another 10-15% from here.
The ceasefire scenario (our 20% probability risk that invalidates the oil thesis) has just been repriced lower. A diplomatic off-ramp requires de-escalation; residential strikes inside Iran generate domestic political pressure in Tehran to retaliate, not negotiate. That scenario probability, in our framework, likely belongs closer to 10-12% tonight.
The bonds SHORT thesis gains further conviction. 10Y TIPS at 1.97% and term premium at 72bp were already pointing higher; an oil shock that arrives in April CPI data (reported April 10, four days away) could force a rapid repricing. The 10Y nominal at 4.31% looks inadequate compensation for the inflation scenario now on the table.
Positioning Implications
The highest-conviction expression remains LONG GOLD / SHORT LONG DURATION, now with an additional geopolitical urgency layer. The single most important near-term data point is April 10 CPI, if the energy pass-through has already begun showing in the March print, the combination of that data release and this escalation creates a compression event for bonds that the current 4.31% yield does not price. Watch overnight oil futures when Asian markets open as the first clean read on how the market is sizing Hormuz risk.
Explore these indicators together: Chart Household Financial Obligations Ratio, WTI Crude Oil, and 3 more on the Indicators Dashboard