BlockBeats report: On July 21, a new diplomatic opening emerged in the U.S.-Iran conflict. Iran confirmed receipt of a proposed "10-day ceasefire" from mediators, with Qatar and Pakistan working to restore the situation to its pre-July 9 status in order to resume implementation of the previous memorandum of understanding. However, on the same day, U.S. forces launched their tenth consecutive airstrike on Iranian targets, and Trump publicly stated that if Iran causes further U.S. military casualties, it will pay "many times over," indicating that military pressure and diplomatic engagement are proceeding simultaneously.
The market should note that such ceasefire proposals are more like tactical maneuvers to buy time for negotiations, rather than a signal that the conflict is about to end. This is because the core disagreement between the U.S. and Iran remains centered on control of the Strait of Hormuz and maritime security. Iran has clearly identified the Strait of Hormuz as a vital lifeline for its national security, while the U.S. views the restoration of commercial shipping as one of the primary justifications for continuing its military operations. Until substantive progress is made on this issue, energy supply chains will remain unlikely to return to normal.
Greater uncertainty stems from the Red Sea. The Houthi group has announced a maritime blockade against Saudi Arabia, while Saudi Arabia has stated it will take necessary military actions to secure the Bab el-Mandeb Strait. This means global markets are now facing risks to two critical energy arteries simultaneously: the Strait of Hormuz, which handles crude oil exports from the Persian Gulf, and the Bab el-Mandeb Strait, which is vital for Saudi Arabia’s crude oil exports of approximately 4.9 million barrels per day through the Red Sea. Even if the Houthis ultimately do not fully block the waterways, just this announcement is enough to raise insurance costs, alter vessel routing, and disrupt shipping expectations.
In addition to energy risks, new supply shocks have emerged from the Black Sea. The Kazakh CPC oil terminal has been forced to shut down after another tanker attack, while Ukrainian and Russian grain exports have also been simultaneously disrupted. This means the market is no longer just concerned about Middle Eastern crude oil, but is now facing a dual supply pressure of “energy plus food.” As rising oil prices increase transportation and fertilizer costs, and Black Sea grain exports remain restricted, inflationary pressures will further intensify in emerging markets and countries dependent on imports.
This supply shock is resonating with renewed hawkish discussions within the Federal Reserve. Former New York Fed President Dudley believes that increased demand from AI investments, rising energy prices, and still-easy financial conditions could pressure the Fed to raise rates more aggressively this fall; however, Morgan Stanley maintains that interest rates will remain unchanged throughout the year, arguing that market-driven financial tightening is equivalent to several rate hikes. What truly matters is not which view prevails, but the Fed’s tolerance for “energy inflation” versus “economic slowdown.”
Wall Street funds have already adopted a defensive stance. U.S. money market funds, which manage over $8 trillion in assets, have recently shortened their duration significantly, increasing holdings in overnight repurchase agreements and floating-rate bonds—indicating that large investors are willing to forgo some yield in exchange for greater reinvestment flexibility. This is essentially preparing for two scenarios: if oil prices continue to rise, the Fed may be forced to maintain high interest rates for longer; or if tensions suddenly ease, short-term interest rates could reprice very quickly.
For risk assets, the greatest pressure in the current environment does not stem from a single event, but from the simultaneous lack of predictability in policy and supply chains. Any new actual disruption at one of three critical chokepoints—the Strait of Hormuz, the Bab el-Mandeb Strait, or the Black Sea—could rapidly transmit to oil prices, grain prices, and bond yields; meanwhile, under Walsh’s leadership, the Federal Reserve has deliberately reduced forward guidance, making it even harder for markets to anticipate the policy path ahead.
In the short term, the market will focus on three key indicators: whether the 10-day ceasefire proposal receives substantive responses from the U.S. and Iran, whether the Houthis will take action against Saudi-related vessels, and when CPC terminals will resume shipments. These three signals will determine whether energy risks remain at the level of expectations or evolve into actual supply shortages.