(The opinions expressed here are those of the authors.)

By Anna Szymanski

April 10 -

Everything Mike Dolan and the ROI team are excited to read,

watch and listen to over the weekend.

From the Editor

Hello Morning Bid readers!

Markets returned from the long holiday weekend anything but

rested, as U.S. President Donald Trump threatened civilizational

destruction if Iran didn't reopen the Strait of Hormuz before

his deadline on Tuesday. But instead of hellfire came news of a

two-week ceasefire, which was initially cheered by markets. The

question now is whether that optimism will last as investors

consider the wide gap between Washington and Tehran and

the damage to energy supply chains caused by this conflict.

No one knows what will happen next, of course, but it seems

likely that conditions will be less benign than many traders

currently seem to believe.

The eleventh-hour ceasefire announcement late on Tuesday sent

both Brent and West Texas Intermediate (WTI) crude

prices tumbling from upwards of $110/bbl to under $100 a barrel.

This, in turn, allowed global stocks and bonds to stage a relief

rally on Wednesday, as U.S. equity indexes finished sharply

higher, Asian markets surged, and Europe's STOXX 600 logged

its best day in over 4 years. Government bonds rallied as well,

while the dollar weakened against developed-market peers on

hopes of a lasting end to the conflict.

However, cracks quickly emerged in the Pakistan-brokered

ceasefire, pushing crude prices back towards $100/bbl on

Thursday and stalling the global equity relief rally.

The deal appeared increasingly fragile after Israel on Wednesday

staged its largest attack on Hezbollah during this conflict,

with Washington and Tehran disagreeing about whether strikes on

the Lebanese militant group were meant to be included in the

ceasefire agreement. Additionally, Iran attacked Saudi Arabia's

East-West Pipeline - its only crude oil export route since the

war began - shortly after the ceasefire was agreed.

For markets, the biggest question is what is - or is not -

happening in the Strait of Hormuz, the critical artery for the

global energy system. Trump had said the ceasefire is contingent

on the narrow waterway's reopening, yet the strait remains

effectively closed.

For Tehran, reopening appears to involve charging tolls for

transiting ships, a demand that would likely result in higher

global energy prices for years to come. This has all led Trump

to write on Truth Social: "That is not the agreement we have!"

Further peace talks are still set to go ahead in Islamabad this

weekend, despite Iran suggesting they would be "unreasonable" in

light of the Israeli strikes in Lebanon and Trump issuing

further military threats. Israel has said it would open separate

talks with the Lebanese government aimed at ending the war there

⁠and disarming Hezbollah.

Markets appear somewhat optimistic about the likelihood that

fighting in Iran will not resume soon, with U.S. stock indexes

advancing on Thursday and Asian equities rising on Friday,

putting them on track for their best week in over three years.

Wall Street was flat before the bell on Friday.

However, even if the parties agree on a lasting ceasefire,

this will likely only bring partial relief to global energy

markets. As a reminder, oil prices are still well above their

levels before the conflict broke out, with Brent and WTI up

around 34% and 48%, respectively, since the war began on

February 28.

What's more, production capacity in the region is still

depressed, with Saudi Arabia's oil output down by 600,000

barrels per day and throughput on its East-West Pipeline by

about 700,000 bpd, according to government sources.

While exporters in the Middle East could soon begin shipping oil

trapped in the Gulf if the Strait of Hormuz is reopened, hopes

of a rapid return to normal flows are almost certainly

misplaced. This is particularly worrisome for Asia, where

physical energy markets are likely to remain under stress for

months even in the most optimistic scenarios.

All of this leaves the Federal Reserve in an increasingly

unenviable position as higher global energy prices threaten to

exacerbate already elevated inflation - and potentially unanchor

inflation expectations - as Americans eye higher prices at the

pump.

On that front, this week's macro releases included U.S. services

PMIs that showed rising input costs - an early signal of renewed

inflationary pressure - alongside PCE inflation figures that

showed an expected uptick in U.S. price increases in February,

before the war started.

At a global level, IMF chief Kristalina Georgieva warned again

on Monday that "all roads" now point toward higher prices and

slower growth, a message unlikely to comfort policymakers wary

of the spectre of stagflation.

Federal Reserve minutes released on Wednesday suggested more

officials are leaning toward a rate hike in response to

inflation risks, though most continue to see rate cuts as the

base case later this year, with scope for deeper easing should

the conflict begin to weigh on U.S. employment.

Both policymakers and investors will thus be eagerly

awaiting today's release of consumer price index (CPI) data for

March, as investors shift their attention away from the

battlefield - at least for now.

For more data-driven insights on markets and commodities, check

out Reuters Open Interest. You can learn:

* What is currently the biggest worry for copper

bulls ?

* What's one of the largest potential threats to global

financial stability according to a recent IMF post?

* Why might the Iran energy shock lead to one of the most

volatile periods for Asian currencies in decades?

* Will global central banks "look through" the energy shock

- and what are the possible consequences if they don't?

* What can the Chicago Bears relocation fight teach us about

economics?

This weekend, we're reading...

RON BOUSSO, ROI Energy Columnist: This Foreign Affairs

article offers a sharp analysis of China's view on the Iran war

and the growing risk that a volatile U.S. poses to Beijing's

economic and diplomatic interests.

ANDY HOME, ROI Metals Columnist: A new International Energy

Agency report is essential reading on rare earths that goes

beyond the basics to spotlight an often-overlooked driver:

explosive demand for rare earth permanent magnets.

JAMIE MCGEEVER, ROI Markets Columnist: "Shattered

Assumptions And The Energy Quandary" is a deep dive by the

always interesting Louis-Vincent Gave of Gavekal Research into

the place global energy holds in the minds of investors - the

risks and rewards, the upsides and downsides.

We're listening to...

CLYDE RUSSELL, ROI Asia Commodities and Energy Columnist: I

appeared on Gulf Intelligence's Daily Energy Markets Podcast for

a great discussion on the Iran war ceasefire, with heaps of

scepticism over whether it will hold and result in a lasting

deal. We also explored why the real crisis lies in refined

fuels, not crude prices.

And we're watching...

ANNA SZYMANSKI, ROI Editor-in-Charge: Why hasn't the Iran

conflict triggered a classic flight to safety? I explored this

question on the Reuters Econ World Podcast with host Carmel

Crimmins and my ROI colleague Mike Dolan, discussing the recent

moves in gold, Treasuries and haven currencies. We ask whether

it may be time to rethink the entire concept of a safe haven.

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Opinions expressed are those of the authors. They do not reflect

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