6:00, a gentle tremor, the world has not completely surrendered yet

Source: Wall Street Intelligence Circle

6:00 a.m. Monday, East 8th District, the global market opened on Monday amidst turmoil:

- Oil prices and the US dollar surged and then plummeted, with US crude oil breaking above $100 before falling back below this level;

- Gold opened lower but then quickly rebounded, regaining the $4,500 level;

- US stock futures gapped lower at the open, but did not recover all losses like gold did.

First, this war has lasted for four weeks with no signs of easing. Trump and Iran have exchanged threats of war, pushing the conflict from a "localized friction" to a "strategic showdown."

Trump set a two-day deadline for Iran, demanding it reopen the Strait of Hormuz, or else he would bomb its power plants. This deadline is set to expire Monday evening (New York time).

In response, Iran stated that if its power facilities are attacked, it will "completely" close the Strait of Hormuz.

Second, the market is currently pricing in only "one-third" of the risk—that is, it is only pricing in the risk of the Strait of Hormuz being closed—while the other "two-thirds" of risks are not yet included. These are:

· Stagflation risk: Inflation may resurge, expectations for rate cuts might vanish, and there might even be discussions of rate hikes (so far, only a small part of this is priced in)

· Recession risk: If the war drags on, a chain reaction will start to appear in economic data. It will first destroy expectations for rate cuts, then undermine high valuation logic, then erode earnings confidence, and finally, the word "recession" will formally be reflected in prices.

The Federal Reserve fears a repeat of the 2021–2022 mistake, when it thought inflation was only temporary. As time dragged on, inflation became stubborn, and ultimately, the Fed had to raise rates more aggressively. So now, the Fed is tough in its rhetoric (defensive deception), causing expectations for rate cuts to vanish.

Third, the most dangerous thing in the market right now is not panic, but "not truly panicking yet"—because risk assets have yet to experience an "emotional cathartic plunge"; instead, they are being reduced a little each day, which is even more dangerous. Even if people are not selling, they are not buying either (no incremental buy orders).

The market hasn't completely capitulated yet because it is still hoping for a "last-minute deal."