Iran War Closes Strait of Hormuz: Oil Above $75, Inflation Spike Weighs on Bonds

The war in Iran has effectively closed the Strait of Hormuz, the critical 20% chokepoint for global oil flows. China, alarmed at the disruption, demanded its reopening, but efforts to broker a ceasefire remain stalled. Crude oil has rallied to $75-80 per barrel on supply fears and is headed for a weekly gain. The impact ripples through fixed income and currencies: global bond yields are rising as investors price in persistent inflationThe rate at which prices rise across an economy. and the likelihood that central banks will hold rates higher for longer.

Japan's government bond yields have jumped to multi-year highs on Friday, with corporate goods prices surging in April by the most since 2014. The European Central Bank's Governing Council member warned that elevated oil could force an unscheduled rate hike. India's RBI, meanwhile, raised dealer targets for bond market makers and is mulling steep tax cuts on foreign investor bond purchases to attract capital despite inflationThe rate at which prices rise across an economy. headwinds. The message is clear: energy importers are scrambling to manage margin squeeze and capital outflow risks.

Commodity traders are gaming how long the disruption lasts. Dow's CEO said the company is 'hardly moving anything' through the strait and estimates 275 days for normalization. Trafigura and Phillips 66 are racing for waivers to use foreign-flagged tankers for domestic US fuel shipments, a sign of acute supply tightness. Indian state fuel retailers raised diesel and petrol prices for the first time in four years, passing costs to consumers. Gold is under pressure despite inflationThe rate at which prices rise across an economy. expectations because higher real rates trump safe-haven demand; copper has retreated from record highs on dollar strength and slower growth fears.

Equity implications are uneven: energy majors and integrated oils gain from price upside; airlines and transportation (DeltaHow much an option's price changes per $1 move in the underlying., Norwegian Cruise) face cost headwinds; and consumer discretionary names weaken as inflationThe rate at which prices rise across an economy. erodes purchasing power. The real question is whether oil stays elevated or normalizes within weeks. Markets are pricing a 6-8 week window of high prices before geopolitical resolution.