Key Points
- President Trump rejects Iran’s proposal to reopen the Strait and discusses an extended US naval blockade.
- Brent crude futures (June’26) jump to more than $120 per barrel.
- The Fed kept interest rates on hold in Jerome Powell’s last FOMC meeting as Fed Chair.
- Powell says he will stay on as governor for “an undetermined period of time.”
During a Tuesday meeting with oil executives, President Trump rejected Iran’s proposal to reopen the Strait and discussed extending the US naval blockade. (GroundNews)
WASHINGTON, April 29 (Reuters) – U.S. President Donald Trump met with top officials from Chevron (CVX.N) and other energy companies on Tuesday to talk about possible steps to calm oil markets if the blockade of Iranian ports continues for months, a White House official said on Wednesday.
The talks focused on U.S. oil production, oil futures, shipping and natural gas, the official said.
“They discussed the steps President Trump has taken to alleviate global oil markets and steps we could take to continue the current blockade for months if needed and minimize impact on American consumers,” the White House official said.
Talk of an extended blockade and a sharp fall in US inventories drove June’26 Brent crude futures to above $120 per barrel.
The EIA report for the week ended April 26 showed an accelerating decline in crude inventories, including the Strategic Petroleum Reserve (SPR).
The inventory chart above includes the SPR, shown separately below.
No Change at the Fed
The Fed left its target range for the funds rate unchanged at 3.5%-3.75% for the third consecutive meeting. There were four dissenting votes on the FOMC, with three opposing language that signaled possible future rate cuts, while Trump appointee Stephen Miran called for an immediate reduction. (AP/EuroNews)
Jerome Powell’s term as Chair ends on May 15, with his nominated successor, Kevin Warsh, likely to be sworn in before the next meeting, following approval by the Senate Banking Committee.
Powell indicated that he intends to remain on the Federal Reserve’s governing board for “an undetermined period of time”, citing concerns about what he described as “unprecedented” legal attacks by the Trump administration on the central bank.
Mr Powell said he would wait for the conclusion of an investigation into the Fed’s building renovations before stepping down fully.
“I’m waiting for the investigation to be well and truly over, with finality and transparency,” he said. “I will leave when I think it appropriate to do so.” His term as governor expires in January 2028.
Powell’s decision to stay on forces the resignation of Stephen Miran, a temporary Trump appointee, to make way for the appointment of Warsh as governor. The move denies President Trump the opportunity to nominate a replacement, which would give him greater influence over Fed monetary policy.
Long-term Treasury yields are rising in response to higher oil prices and the improved prospect of an independent Fed. 10-Year yields are expected to test resistance at 4.5%.
We expect the S&P 500 to retrace to test new support at 7000 as a looming global oil shortage overshadows robust quarterly earnings.
The Dow Jones Industrial Average retreated below short-term support at 49K, suggesting another correction.
Gold found support at $4,500 per ounce, but the rally may be short-lived if oil prices keep rising.
Conclusion
An early reopening of the Strait of Hormuz is unlikely. We expect a prolonged closure, with shortages driving crude oil prices to between $140 and $150 per barrel by the end of May.
Higher crude prices increase upward pressure on long-term Treasury yields, which would be bearish for stocks.
We also expect Gold to test support at $4,000 per ounce as Gulf states and major oil importers draw on their reserves.
Acknowledgments
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.
Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.
Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.
