Oil prices jump after Iran says critical Strait of Hormuz to remain shut
A material correction is underway, with stocks, bonds, the dollar, and crypto lower.
Over the long weekend, Trump’s push to acquire Greenland heated up significantly, with Trump threatening to place 10% tariffs beginning on February 1st on 8 EU countries which objected to Denmark selling Greenland to the US, including an escalation to 25% tariffs beginning in June if a sale of Greenland is not in place. Stock markets around the globe are selling off on the situation.
Also pressuring equities are rising bond yields, which had been moving north before this latest development. The US 10-year is up 4bps this morning to 4.28%, the highest since September. The 30-year broke through 5%, the highest since July, before pulling back to 4.90%. The 2-year is flat on the day but at 3.59% is at its highest in a month. Global yields are also rising today. Japanese yields are soaring; the 10-year is up 8bps, to 2.35%. The 30-year is up a huge 30bps to 3.91%, both the highest in 30 years. With global debt levels at all-time highs, rising rates have the potential to disrupt budgets in a big way. The US dollar index is down nearly 1% on the day, back to flat for the trailing month at 98.23, near the level it’s been wrapped around since last May.
On the commodity front, gold and silver have hit yet another new high, with gold breaking through $4,750/oz, up 8.2% in a month, and silver breaking through $95/oz, up over 35% in a month, before both pulled back modestly as stocks came off the lows. Copper is flat on the day, still up 5.5% in a month, but down 4% in the last week. Energy is higher, with crude oil back above $60/bbl, natural gas is up a whopping 24%, but it’s more of a recovery, still down 5.8% in a month. Gasoline is flat on the day but up 5.8% in a month.
Crypto has seen a risk-off sell-off, with Bitcoin down 2.8% to $90.4K, down 3.1% in a week, but still up 2.8% in a month. Regulatory relief keeps getting kicked down the road. While most leading bankers say they see blockchain systems being the inevitable future of finance due to instant settlement with much lower costs, how much this benefits crypto coins remains uncertain. Crypto bulls still see the wider acceptance expected that new legislation will result in many more buyers, especially institutions looking to diversify their portfolios.
As the trading day develops, stocks are off their lows, as investors remember well the buying opportunity that Trump’s "Liberation Day" of broad tariffs announced last April produced. That said, we still await the Supreme Court’s ruling on the legality of existing tariffs, which could bring unpredictable volatility. The VIX has dropped below 19.
While the geopolitical risks are troubling in the short term, in the bigger picture, investors remain bullish on stocks and expectations for economic growth and strong earnings in 2026. Odds are likely that today will be seen as a buying opportunity.