WS #13569

The dominant market narrative remains the Strait of Hormuz conflict, which is ESCALATING after a brief de-escalation. Oil prices surged ~3% (Brent +3.8% to $82.49, WTI +2.8% to $77.29) after reports that Iran's parliament is reviewing a bill to bar US/Israeli 'hostile' vessels from the strait, and Houthi attacks resumed in the Red Sea. This directly reversed the prior week's optimism over a US-Iran deal, pushing US equities lower (Dow -0.85%, S&P -0.18%, Nasdaq -0.06%) as inflation fears and rate-hike expectations returned. Trump's comments that the war 'will end pretty soon' and that a Hormuz deal 'could be soon' provide a counter-signal, but the market is treating them as unreliable given the lack of a concrete agreement. The Fed's Musalem reinforced a hawkish stance, saying inflation risks are tilted higher and gradual hikes beat abrupt moves, supporting the dollar and pressuring risk assets. In earnings, tech diverged sharply: Datadog plunged 19%, AppLovin -19.7%, Western Digital -13%, and Sandisk -6.8% on AI capex concerns, while Microchip jumped 10% after hours on a strong beat, and Airbnb and Cloudflare rallied after hours on solid results. SpaceX shares rose 6% despite a massive lockup expiry of 900M shares. The polysilicon tariff (15%) is a confirmed policy action benefiting US solar (FSLR) but pressuring Chinese imports. Overall, the market is caught between geopolitical risk premium and hopes for a diplomatic resolution, with oil and rates as the key transmission channels.