WS #13970

The dominant theme remains the Strait of Hormuz closure, with the US and Iran trading claims of control, and no de-escalation. Trump reiterated US 'total control' over the strait, calling the blockade a 'Wall of Steel,' while Iran's Persian Gulf Strait Authority (PGSA) categorically rejected US claims, stating the waterway remains blocked until Iran's conditions are met. Shipping traffic through Hormuz has fallen to near three-month lows, with only 8 transits on Tuesday versus 125-140 pre-war. This stalemate continues to underpin oil prices, with WTI holding near $83.27 and Brent near $88.98, despite IEA and OPEC cutting demand forecasts. The IEA warned that inventory buffers are rapidly depleting, adding to supply concerns. This is a stable, ongoing escalation with no new counter-signals, so the energy complex remains bid while airlines and shipping face headwinds. The US CPI report for July came in line with expectations (headline 3.4% YoY, core 2.5% YoY), easing pressure on the Fed and reducing September rate hike odds to around 40-46%. This supported equities, with the S&P 500 and Nasdaq closing higher, and gold surging to near $4,400/oz, testing two-month highs. The AI infrastructure rally continues to dominate, with CoreWeave and Super Micro surging on earnings, and Nebius jumping 34% on strong AI demand. However, Cisco's earnings beat was overshadowed by a drop in gross margins, sending its stock down after-hours, and Cerebras Systems tumbled 16% after hardware sales declined. These mixed signals suggest the AI trade is bifurcating between pure-play infrastructure winners and those with margin or hardware concerns. South Korean stocks entered a bull market, up 23% from July lows, led by Samsung and SK Hynix, as the AI trade roars back. This corroborates the global AI infrastructure demand narrative. The yen is approaching 160 per dollar, with Goldman noting Japan has 'plenty of capacity' for further intervention, which could be a source of volatility. Overall, the market is in a 'risk-on but cautious' mode, with the Hormuz situation and Fed path as key swing factors.