The 10-day ceasefire between Israel and Lebanon shifted the mood further. Hope for resumed U.S.-Iran talks replaced fear of escalation. The U.S. naval blockade on Iran is still in place but the market stopped trading the blockade and started trading the diplomacy. That’s a bearish shift in focus and prices reflected it immediately.
I keep coming back to how fast this move happened. The risk premium that took days to build came out in hours. That tells you positioning was crowded on the long side going into Friday. When the narrative flipped, the exits got congested.
Near term the bias stays bearish as long as the Strait remains open and ceasefire talks hold. One breakdown in negotiations and the risk premium comes back just as fast as it left.
