Recently, the geopolitical situation has become somewhat tense, and the US-Iran negotiations have completely broken down. Last week, the US and Iran held their highest-level talks since 1979 in Islamabad, but no substantial results were achieved. The US side's demands were quite tough, requiring Iran to stop uranium enrichment, dismantle facilities, cease funding support to organizations like Palestine, and fully open the Hormuz Strait. Iran obviously refused, and the US immediately announced their withdrawal.

Even more severe measures followed. Trump then stated that the US would not allow Iran to profit from oil sales, and the US Central Command directly announced a maritime blockade of all Iranian ports starting April 13. This move is indeed aggressive, but it also indicates that both sides are testing each other's bottom lines.

The market reacted quickly. Crude oil surged over 10% on Monday’s open, with WTI breaking through the $100 mark and reaching a high of $105.6. Gold also declined, dropping from $4,700 to $4,639.3. The crypto market fared worse, with Bitcoin and Ethereum falling over 3% and 4%, respectively. However, the latest data shows Bitcoin is around $77.64k, and Ethereum is at $2.32k. Honestly, this geopolitical shock has a pretty significant impact on risk assets.

Looking at economic data, the US March CPI increased by 0.9% month-over-month, the largest single-month rise since June 2022, with year-over-year rising to 3.3%. The most notable was the record increase in gasoline prices, the highest since 1967. The US 10-year Treasury yield is around 4.31%, reflecting rising inflation expectations. Core CPI rose only 0.2% month-over-month, below expectations, but the secondary effects of energy shocks are expected to manifest in April.

Consumer confidence also collapsed. The University of Michigan’s preliminary April consumer sentiment index plummeted from 53.3 in March to 47.6, hitting a new all-time low. Concerns about energy prices and the war have significantly increased, with one-year inflation expectations jumping from 3.8% to 4.8%, well above the expected 4.2%. This indicates market anxiety about future inflation.

The stock market performance was mixed. The three major US indices showed varied moves: Dow down 0.56%, S&P 500 up 0.35%, Nasdaq down 0.11%. European stocks mostly declined, with Germany’s DAX down 0.01% and UK stocks also slightly lower. However, the Philadelphia Semiconductor Index rose 2.31%, indicating some market segmentation remains quite evident.

Interestingly, the UK government directly refused to participate in Trump’s Hormuz Strait blockade plan. The UK issued a statement emphasizing freedom of navigation and refusing to cooperate with military actions. This also reflects some disagreements among allies on this issue.

IMF Managing Director Georgieva stated that even if a ceasefire holds, it will take a considerable amount of time for global prices to return to pre-war levels. She also mentioned that the IMF will lower its global economic growth forecast, with the specific adjustment depending on the duration of the war and the speed of capacity recovery.

Currently, both sides are in a “fight but not breaking” standoff, but markets worry that this negotiation is just a mutual testing of bottom lines. Once it breaks down, the risk of renewed or escalated conflict will significantly increase, with considerable impacts on the global economy. Monitoring the performance of safe-haven assets like crude oil and gold during this period will be very important.