Oil Boils Up Again, Twisted Realities of the Strait, Epic Earnings

There was a break. Hope you filled your tank. Last night, I noticed that a gallon of 87-octane unleaded gasoline was going for about $4.20 in my neighborhood. The price had bottomed around $3.80 last week, more or less moving with crude oil prices as it looked like maybe peace in the Middle East had a better chance than it does right now. The ballgame, of course, really is not about saving lives, though that's a wonderful concept. It's about getting tanker and cargo-bearing, ocean-faring vessels through the Strait of Hormuz safely.

As I work through the zero-dark hours on Tuesday morning, I see that front-month WTI Crude futures are trading around $99 per barrel after trading with an $88 handle last Thursday and an $83 handle about 10 days ago. The obvious result, over time, should the Strait of Hormuz remain closed to commercial traffic would be the finding of alternative routes for Persian Gulf exporters.

About 25% of the world's petroleum liquid consumption has to pass through this channel on a daily basis during what used to be considered "normal" times. Exporters such as Saudi Arabia, Iraq, the UAE, and Kuwait, will over time, find overland routes that might require some construction to deliver their goods and especially energy commodities to huge commodity importers such as China, India, Japan and South Korea. I have a hard time believing that they have put up with the situation as is for as long as they have to this point.

The situation, for the moment, has what remains of the Iranian military threatening passage through the Straight for all, while the U.S. Navy blockades Iranian vessels and vessels stopping at Iranian ports. Something has to give, one would think. How long can the Iranian economy last without trade? Then again, does whoever is in charge in Iran even care about the population? Their domestic actions imply that they do not.

Breaking: A 'Proposal' for the Strait...

So, we all know that the Iranian "authorities" have made a proposal to the U.S. that would open the Strait to commercial passage once the U.S. Navy relaxed their blockade. The catch? Iran wants to postpone any negotiations covering the truly important items under consideration where there is disagreement, such as that nation's nuclear weapons program. Iran also wants to maintain at least partial control over shipping through the Strait.

I don't see either of these points or requests as realistic. Why on earth would the U.S. give even an inch to a nation that has been all but defeated militarily and whose economy is now under intense pressure? The ability to strike defenseless, civilian vessels in the Strait is all of the leverage that Iran has left.

Nevertheless, Bloomberg News, among other outlets, is reporting that U.S. Pres. Donald Trump has convened his national security team to discuss the Iranian offer and most likely out together a counter proposal. On Monday, White House Press Sec. Karoline Leavitt told the media that the president would address this matter shortly and that “His red lines with respect to Iran have been made very, very clear.”

The "red lines" comment was made, obviously, in reference to Iran's efforts to develop nuclear weaponry. Sec. of State Marco Rubio told Fox News on Monday that the administration has “questions about whether the person (in Iran) submitting it (the proposal) had the authority to submit.”

Iranian Oil ...

The word is that up to eight super-tanker ships laden with Iranian oil have clustered off of the port of Chabahar in Iran. This port is just outside of the Persian Gulf, in the Gulf of Oman, but also just shy of the U.S. Navy's line of blockade. This inability for oil to pass not only hurts the Iranian economy, but also the economies of China, India and beyond at this point. Perhaps China can now pressure Iran to concede.

In the meantime, this is also evidence that Iran is running out of storage for its crude. Once Iran has to shut down production, that nation will be put in an even more difficult position with even less leverage. It is believed that Iran is pulling older, retired vessels back into service as the need for someplace to put the oil grows.

This situation really matters. Oil fields require constant production. Infrastructure starts to decay almost immediately upon a shutdown. A prolonged shutdown would likely cause irreversible damage to pipelines, reservoirs and refineries. Additionally, restarting the entire system would be extremely costly. This puts all of the leverage in the U.S. Navy's hands.

Waiting

I stay my haste, I make delays,
For what avails this eager pace?
I stand amid the eternal ways,
And what is mine shall know my face.

The waters know their own and draw
The brook that springs in yonder height;
So flows the good with equal law
Unto the soul of pure delight.

The stars come nightly to the sky;
The tidal wave unto the sea;
Nor time, nor space, nor deep, nor high,

Can keep my own away from me.

- John Burroughs, 1863

In The Meantime: Earnings, FOMC

Wall Street keeps its focus not just on the peace process, but also on quarterly earnings to be released later this week by Amazon (AMZN) , Alphabet (GOOGL) , Meta Platforms (META) , Microsoft (MSFT) and Apple (AAPL) . This earnings season has been stellar to date. The Fed's Federal Open Market Committee will also make a policy decision on Wednesday afternoon, but I really have doubts about how seriously this one meeting will be taken, despite what comes out of the press conference now that it's pretty clear that there will be a new sheriff in town in less than three weeks.

Anyone Else Notice...

That the holdings of U.S. Treasury debt securities by primary dealers has risen to about $550 billion on average for 2026 from an average of less than $400 billion for 2025? That's about 2% of the entire market for U.S. Treasuries. Is 2% a big deal? Doesn't sound like it. Then again, that's the highest percentage held for primary dealers since 2007. Yes, there have been regulatory changes that have allowed for the large banks to become more involved as intermediaries, but I don't like anything that hearkens back to the dark days of the great financial crisis of 2008-2009 (really, for most of Main Street... more like 2008-2016).

Marketplace

Monday was a rather uneventful day for most of Wall Street. The Nasdaq Composite tacked on 0.2% as the S&P 500 gained 0.12% with both major equity indexes again posting new record high closes. The small- and mid-cap indexes were all up small as the Philly Semiconductors finally rested, giving back 1%. The banks had a nice day as Treasury yields continued to rise.

Five of the 11 S&P sector SPDR ETFs closed out the regular session on Monday in the green with the financials (XLF) in the lead. The Staples (XLP) finished dead last on Monday as cyclicals and growth sectors both outperformed the defensives.

In what really was a listless session, winners beat losers by a seven-to-six margin at the NYSE and by a rough nine to eight at the Nasdaq. Advancing volume took a 56.5% share of composite NYSE-listed trade, but just a 46.7% share of composite Nasdaq-listed activity. Aggregate trading volume was up 3.8% on a day-over-day basis across NYSE-listings, but down a whopping 20.4% day-over-day across Nasdaq-listings.

This more or less makes Monday's price discovery a lot less meaningful than it might have otherwise been. That makes sense given the major earnings still to come this week, the central bank's policy decision still to come this week and President Trump's response to Iran probably still to come as well.

Economics

(All Times Eastern)

08:15 - ADP Employment Change (Weekly): Last +54.75K.

08:55 - Redbook (Weekly): Last 6.7% y/y.

09:00 - Case-Shiller HPI (Feb): Expecting 1.0% y/y, Last 1.2% y/y.

09:00 - FHFA HPI (Feb): Expecting 0.1% m/m, Last 0.1% m/m.

10:00 - CB Consumer Confidence (Apr): Expecting 89.5, Last 91.8.

10:00 - Richmond Fed Manufacturing Index (Apr): Expecting -4, Last 0.

4:30 - API Oil Inventories (Weekly): Last -4.4M.

The Fed

(All Times Eastern)

Fed Blackout Period.

Today's Earnings Highlights (Consensus EPS Expectations)

Before the Open: (AMT) (2.43), (KO) (.81), (GM) (2.62), (SPOT) (2.94), (UPS) (1.03)

After the Close: (NXPI) (2.98), (HOOD) (.43), (STX) (3.50), (SBUX) (.44), (TMUS) (2.11), (V) (3.10), (WM) (1.74)

At the time of publication, Guilfoyle was long AMZN equity.