A Lull in Hostilities

Key Points

• Hostilities in Lebanon faded.
• Tankers transiting the Strait of Hormuz increased.
• Brent Crude futures fell to $77.64 per barrel.
• 2-year Treasury yields rose above 4.20% amid expectations of tighter Fed monetary policy.

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Brent Crude futures (Aug’26) fell to $77.64 per barrel on reports of a lull in hostilities in Lebanon.

Prices fell more than 3% on Monday after ​the United States granted Iran a 60-day sanctions waiver following initial peace talks, ​and as officials reported a lull in hostilities in Lebanon under the ⁠broader agreement.

“The gradual increase in oil flows through the Strait of Hormuz continues to weigh ​on the market,” said ING analysts in a note.

Two crude tankers with just under 2 ​million barrels of oil sailed through the Strait of Hormuz on Monday, ship-tracking data showed, in a sign that traffic was picking up following weaker flows on Sunday due to concerns over passage through the ​waterway. (Reuters)

The text of the Memorandum of Understanding signed by the US and Iran can be separated into two parts. The MOU is mostly “talks about talks” where the parties merely agree to negotiate the terms of a Final Deal, but it contains an agreement to cease hostilities while negotiations take place, including:

• Immediate termination of hostilities on all fronts, including Lebanon.
• Ensuring the territorial integrity and sovereignty of Lebanon.
• The US to lift its blockade of Iranian shipping.
• The US to waive existing sanctions against Iranian crude oil and petroleum exports.
• The US to release frozen or restricted funds and assets belonging to Iran.
• Iran will make its “best efforts” to ensure the safe passage of shipping through the Strait of Hormuz.

The MOU offers Iran a financial reward in exchange for allowing safe passage through the Strait. The deal is tenuous, and already the IRGC has threatened to close the Strait due to ongoing hostilities in Lebanon.

Israel is not a signatory to the MOU, and will not readily agree to the first two terms if it feels that they compromise their national defense. The Gulf States are also not signatories, and will similarly defend their national interests.

Financial Markets

2-year Treasury yields climbed to 4.209%, more than 45 basis points above the Fed funds target range, in expectation of tighter Fed monetary policy.

The Chicago Fed National Financial Conditions Index below -0.50 continues to signal easy monetary conditions.

Bitcoin¹ is testing primary support at 60,000, signaling a shift in financial markets to risk-off. A breach of support would warn of a market-wide contraction.

Treasury Markets

10-year Treasury yields firmed to 4.51%, suggesting another test of resistance at 4.75%.

Stocks

SpaceX retreated to test its June 12 opening price of 150.

The Magnificent 7 also lost ground, with the Roundhill Magnificent 7 ETF (MAGS) retreating below support at 68 on the weekly chart below. Declining Trend Index peaks warn of a correction.

The S&P 500 also shows signs of secondary selling pressure.

Dollar & Gold

The Dollar strengthened amid expectations of higher short-term interest rates. Breakout of the US Dollar Index above 100.50 indicates an advance to 103, but first expect retracement to test support at 100.

Gold is testing primary support at $4,000 per ounce, with declining Trend Index peaks warning of selling pressure. A breach of $4,000 would indicate another decline, but beware of a bear trap. Gold is in a secular uptrend that we expect to last for decades.

Energy

The Dow Jones Global Oil & Gas Index broke support at 575, signaling a primary downtrend.

Uranium

Sprott Uranium Miners ETF² (URNM) broke primary support at 58, also signaling a downtrend.

Copper

Copper is testing support at 13,500, and declining Trend Index peaks warn of selling pressure. A breach of support would warn of a bull trap, with a decline to test the 50-week moving average.

Sprott Copper Miners ETF² (COPP) reinforces the bearish copper chart, retreating from resistance between 44 and 45 while Trend Index peaks below zero warn of persistent selling pressure.

Lithium

Sprott Lithium Miners ETF² (LITP) is also retreating, and a fall below 13 would test primary support at 11.

Critical Minerals

Sprott Critical Materials ETF² (SETM) shows similar signs of selling pressure, and another test of primary support at 30 is likely.

Conclusion

Brent Crude and oil and gas stocks are falling as the Strait of Hormuz is tentatively reopened, but the real test will be the impact of global strategic reserves. A continued decline would cause a rebound in energy prices.

Financial markets are shedding high-risk assets amid expectations of tighter monetary policy. Declining Trend Index peaks on the S&P 500 signal a correction.

The Dollar is strengthening, and Gold is headed for another test of support at $4,000 per ounce, but these moves run counter to their secular trends where we expect Dollar weakness and Gold strength.

Energy metals are experiencing a broad sell-off amid expectations of lower oil and gas prices if the Strait of Hormuz is reopened.

Uncertainty remains high, and we expect elevated volatility in the months ahead. We adopt a defensive stance, with minimal exposure to high-multiple growth stocks and long-duration financial assets. Value stocks with stable income streams and short-duration financial assets are a haven in times of volatility, but we still expect a secular uptrend in Gold and maintain our position.

Acknowledgments

• CoinDesk: Bitcoin
• Federal Reserve of St Louis: FRED Data
• CNBC: Brent Crude ICE Aug’26 Futures
• Reuters: Oil inches down as investors focus on Hormuz flows after peace talks
• NPR: Read the full text of Trump’s preliminary U.S.-Iran agreement to end the war

Notes

1. Cryptocurrencies are the highest-risk asset class, and we analyze Bitcoin (BTC) solely to identify risk sentiment in financial markets. Our analysis is not a recommendation to buy or sell BTC, nor is it a commentary on the merits of cryptocurrency.
2. We analyze exchange-traded funds (ETFs) to determine market sentiment towards a specific sector, industry, or commodity. The analysis is not a recommendation to buy or sell, nor is it a commentary on the merits of the particular ETF.