What Happened
Iranian missile strikes have ignited fires near a Saudi industrial site, marking the most significant direct military escalation in the Gulf in years. This is not a proxy skirmish, it is a direct state actor targeting the kingdom's industrial infrastructure. The implications for global energy supply are immediate and non-linear.
What Our Data Says
Before this event, our macro regime was already unambiguously stagflation deepening. WTI was sitting at $115.25 and Brent at $97.17, note a significant divergence between these two figures that likely reflects staleness in the Brent data (43.7 hours old) rather than a genuine spread inversion; treat both as indicative only. What matters is that oil entered this shock from an already elevated base, having risen approximately 15% in a single month that was already mechanically loading CPI.
Gold at $4,684 (stale, 4.5 hours) was our highest-conviction long precisely because CFTC positioning sits at only the 17th percentile, structurally under-owned and uncrowded. That thesis just received its most powerful single-session catalyst. VIX carries a critical data problem: our PriceSnapshot reads 34.54 while the FRED daily resolver shows 24.17, a divergence of over 10 points. We cannot construct a clean narrative around volatility levels given this inconsistency, but we can note that either reading confirms elevated stress, and the higher figure, if accurate, would signal the market was already beginning to price tail risk before tonight's escalation.
US equity markets are closed. SPY at 654.06 and QQQ at 582.63 are 4.5 hours stale. Do not interpret these prices as current positioning, they are pre-event artifacts. Bitcoin at $69,290 is the only live liquid signal available, and its stability (essentially flat on the session per our live feed) suggests crypto is not yet acting as a risk-off barometer in after-hours thin trading. That can change rapidly.
What This Means
Our pre-existing risk matrix assigned a 20% probability to a geopolitical supply shock exceeding 2 million barrels per day, with a price target of WTI $140–165 and a mechanical CPI path to 3.0%+ within 60 days. That probability just repriced materially higher. The stagflation deepening thesis, already at 42% probability and the dominant scenario, now faces an accelerant: a supply shock doesn't just deepen stagflation, it converts it into a supply-shock recession where the Fed is completely trapped between fighting inflation and preventing collapse.
The gold bull thesis strengthens decisively. At 17th percentile CFTC positioning, gold has enormous room to absorb institutional inflows as energy inflation risk becomes systemic. Our $5,500+ target in the supply shock scenario is now the number to watch. Equities at 22x P/E with real yields at 1.98% were already structurally mis-priced for a benign world, they are profoundly mis-priced for one where energy infrastructure in the Gulf is under active attack.
HY credit at 3.05% spread (BAMLH0A0HYM2, April 7) looks dangerously complacent. Energy sector stress plus a risk-off impulse could widen spreads 50–100bp rapidly, triggering the credit-equity divergence collapse we've flagged as a key unwind trigger.
Positioning Implications
The single most important thing to watch at the Tuesday open is the WTI front-month print and whether Saudi Aramco issues any operational statement, a confirmed production disruption above 1M bbl/d would be the event that mechanically forces the scenario upgrade from stagflation deepening to supply-shock recession, and every position in the book needs to be sized accordingly.
Explore these indicators together: Chart Household Financial Obligations Ratio, WTI Crude Oil, and 3 more on the Indicators Dashboard