Syz the moment

Donald Trump warned NATO allies that the alliance could face a “very bad” future if they refuse to help the US reopen the Strait of Hormuz, which Iran effectively closed after the US–Israel war began two weeks earlier. The strait is crucial for global energy, carrying about 20% of the world’s oil, and oil prices have surged to about $106 per barrel since the conflict started. Trump is urging European allies and China—who rely heavily on Gulf oil—to contribute military support such as minesweepers and special forces to secure the waterway and counter Iranian drones and mines. He criticized allies, particularly the UK, for responding slowly and questioned whether NATO partners would support the US as the US has supported them (e.g., Ukraine). Trump also suggested he might delay an upcoming summit with China’s President Xi Jinping if Beijing does not help reopen the strait. The US claims it has severely weakened Iran’s military, but Iran can still disrupt shipping using mines and drones. Trump warned the US could launch further strikes on Iran’s oil infrastructure, including Kharg Island, if tensions escalate. Bottom line: Trump is pressuring NATO allies and China to join US efforts to reopen the Strait of Hormuz during the Iran conflict, warning that their response could affect NATO’s future and hinting at further military escalation. Source: FT, CNBC

Since the Iran war began, the Strait of Hormuz has been the focal point, as it accounts for ~20 million barrels of daily oil supply. On Thursday, Iran's Fars News Agency said Houthis in Yemen and other “resistance groups” may soon join the war against the US and Israel, per WSJ. Not too long ago, Yemen's Houthis, who are backed by Iran, were striking ships in the Red Sea, resulting in a major drop in shipping activity. Currently, ~12% of global seaborne oil passes through Bab al-Mandab, making it the world’s 4th-largest shipping chokepoint. If this passage is closed, another ~6 million barrels of daily oil supply would be halted. Total offline capacity between the two Straits would near 25 million barrels per day, or ~25% of global supply. We have another pivotal week ahead. Source: The Kobeissi Letter, EIA

The only reason why stocks have a higher long-term return than bonds and cash is to compensate investors for taking on the greater risk of uncertainty, volatility and drawdowns along the way. Without this risk there would be no higher reward. Source: Charlie Bilello @charliebilello

Note: Figures Rounded. Source: Energy Institute, IEA via VG Global Statistics @Globalstats11

Goldman Sachs on stocks: "Overall, equities [aka stocks] face rising correction risk; valuations are stretched, macro conditions are deteriorating at the margin and cracks are appearing across growth, inflation, credit and labour markets. But strong fundamentals argue against a bear market, reinforcing the view that weakness should be temporary as the medium-term backdrop is more constructive: earnings remain resilient, balance sheets are solid and history suggests that geopolitical shocks often present opportunity rather than lasting damage." Source: Brian Sozzi

The U.S. is currently allowing Iranian oil tankers to pass through the Strait of Hormuz to keep global markets supplied. Iran is still exporting around 1.5 million barrels per day, though tanker traffic in the region has dropped sharply due to attacks. Some ships supplying India and China are still moving through. Treasury Secretary Scott Bessent says the priority is preventing a global supply shock while tensions remain high. The Strait of Hormuz normally carries about 20% of the world’s oil, and oil prices have jumped roughly 40% since the conflict began, with Brent crude hovering around $102 per barrel. The expectation is that once the conflict stabilizes and shipping protection increases, oil prices could fall well below $80. The U.S. denies intervening in oil futures markets. For now, the strategy is simple: keep the oil flowing, stabilize global supply, and avoid a bigger crisis. Source: U.S. Treasury, market reports

Cliffwater’s $33B flagship fund capped redemptions at 7% after investors requested 14%—a record, per Bloomberg. Morgan Stanley limited withdrawals to 5% from its North Haven Private Income Fund, and BlackRock recently imposed limits at 9.3%. Pressure spreads as JPMorgan marks down software-linked loans and tightens lending to private credit firms due to concerns over credit quality, loan valuations, and AI disruption. Public BDCs are also under stress: FS KKR Capital ($FSK) saw its NAV premium collapse over 40 points, and Hercules Capital ($HTGC) dropped roughly 30 points. Investors seek liquidity, but options are shrinking. The key question: when will the broader market take notice? Source: FT, Global Markets Investor

Over a 10y horizon, markets are pricing in inflation of 2.17%; well above the ECB’s 2% target and the highest level since 2024. Source: HolgerZ, Bloomberg