Hormuz Is Opening, but Warsh Keeps the Brake On

Today is a holiday tape, not a normal tape. The NYSE, Nasdaq, and U.S. bond market are closed for Juneteenth, and the next real U.S. cash-market test is Monday, June 22. That matters because the risk picture improved overnight, but the market has not had a full session to price it.

The good news is specific. Commercial traffic through the Strait of Hormuz rose to 25 crossings on June 18, the highest count since mid-April, after Iran and the U.S. agreed to reopen the route. That is a real operating improvement from the wartime average of 7.6 crossings per day.

It is not normal. RFE/RL’s shipping-data summary says pre-conflict traffic was around 110 crossings per day, and Kpler still flagged unresolved implementation details, dark crossings, and operator caution. Iran’s Strait authority is waiving transit fees during the 60-day negotiation period, but ships still need to submit transit requests ahead of arrival. That keeps the shipping rail in repair mode, not solved mode.

Oil is acting better than the physical channel. Brent was around $79.95 in the latest Trading Economics search result, and WTI was back above $77 but still far below the panic zone. The market is no longer trading a fresh closure. It is trading partial reopening plus a weekend verification window.

The EIA is the reason I am not treating sub-$80 Brent as a clean green light. Its June STEO still assumes Hormuz remains effectively closed in the near term, with shipments only resuming in Q3 and pre-conflict flows not returning until early 2027. Under that assumption, it sees global inventories drawing by 6.3 million barrels per day in Q2 and 7.6 million barrels per day in Q3, and Brent averaging $105 in June and July. Spot has improved faster than the official forecast. Either the EIA has to revise down the stress case, or spot crude has to stop celebrating ahead of the logistics.

The equity tape going into the holiday was constructive. FRED has the S&P 500 at 7,500.58 on June 18, up from 7,420.10 on June 17, and Nasdaq Composite at 26,517.93, up from 26,021.66. That confirms Thursday’s relief close. The problem is volatility did not give the same all-clear. The latest official FRED VIX close is 18.44 on June 17, after the Warsh Fed reset, and the next VIX update will not land until after the holiday closure.

Credit is the cleanest part of the dashboard. High-yield spreads are not confirming stress: FRED has the ICE BofA U.S. high-yield OAS at 2.63% on June 17, tighter than 2.71% the day before and far below a recessionary warning zone. If this were only a credit-spread pulse, I would be much closer to GREEN.

But the Fed rail is still the block. The June 17 FOMC statement kept the funds-rate range at 3.50%-3.75% by a 12-0 vote, said activity is expanding at a solid pace, and explicitly tied elevated inflation partly to supply shocks including energy. The market heard it correctly: the 2-year Treasury yield jumped to 4.20% on June 17 from 4.05% on June 16, while the 10-year rose to 4.49%. That is the part of the setup that did not heal with Hormuz.

The economic data gives Warsh room to stay hard-nosed. Initial jobless claims fell to 226,000 for the week ending June 13, while continuing claims rose to 1.81 million. That is not a labor break. May retail sales were strong at $763.7 billion, up 0.9% month-over-month and 6.9% year-over-year. Michigan sentiment improved to 48.9 in June from 44.8, but the details are still inflation-stressed: year-ahead inflation expectations eased only to 4.6%, and long-run expectations stayed elevated at 3.4%.

Tariffs remain a slow burn. AP’s tariff read says the government can continue collecting the 10% worldwide tariff while litigation proceeds, with the Section 122 version set to expire July 24 unless extended. That matters because oil relief helps headline inflation, but tariffs keep goods-price pressure alive.

The broad geopolitical sweep did not find a new dominant risk that replaces the Gulf/Fed stack. Israel and Hezbollah renewed a cease-fire after fresh strikes. China welcomed the U.S.-Iran agreement, but ISW still flags PRC arms and sanctions behavior around Iran, plus pressure on the Philippines in the South China Sea. Those are relevant background risks. They are not the primary deployment driver today.

Historical Context: 1973 Yom Kippur War / Oil Embargo

The 1973 analog still fits, but the phase keeps improving. We are now in the post-breakthrough operating-confirmation window: price has reacted to relief, while the physical supply channel and central-bank reaction function still need proof.

Similarities:

• The primary driver remains a Middle East oil and shipping shock.
• The market is rallying ahead of full physical normalization.
• The Fed is still boxed in by supply-driven inflation even as spot oil improves.
• Consumer sentiment is rebounding from gasoline relief while staying depressed.

Differences:

• Today’s U.S. energy position is much stronger than in 1973, which limits direct vulnerability.
• The reopening mechanism is maritime clearance, transit rules, sanctions relief, and a 60-day implementation window rather than a producer embargo.
• Modern credit markets are not confirming systemic stress.
• Current equity leadership is more concentrated, so a few AI/chip names can support the index while macro conditions stay mixed.

Strategy performance during the analog window (Oct 6 1973 - Mar 18 1974):

Strategy	Typical 5M Return	Typical 5M Vol	Analog Return	Analog Max DD	Analog Vol
Buy & Hold	+4.5%	13.3%	-11.0%	-18.6%	19.6%
200 SMA Trend	+1.8%	10.7%	-4.5%	-5.5%	5.6%
12M Momentum	+2.8%	11.3%	+0.0%	0.0%	0.0%
RSI Mean Reversion	+0.0%	5.8%	-2.8%	-10.1%	17.6%

Interpretation: The analog still argues against panic, but it also argues against treating the first operational improvement as the end of the shock. Trend and momentum avoided the worst damage in 1973 because they waited for confirmation instead of buying every diplomatic headline. That is still the right posture today.

Deployment Stance

I am keeping the pulse at YELLOW.

This is a better YELLOW than the one we had immediately after the Fed meeting. Hormuz traffic is rising, crude is below the stress zone, equities closed Thursday with a real relief bid, and high-yield spreads are calm.

It is not GREEN because the proof is incomplete. Hormuz crossings are 25, not 110. The EIA’s inventory-draw framework has not yet been invalidated by sustained flows. The latest official VIX close is still 18.44. The 2-year yield has repriced higher after Warsh’s first meeting. Labor and retail data are firm enough that the Fed does not have to rescue risk assets.

For deployment, I would let systematic exposure run with normal caution. I would not add discretionary risk into a closed U.S. tape and weekend implementation window. GREEN needs a Monday cash-market confirmation: Brent holding below $80, WTI below $77, VIX back under 17, 2-year yields giving back the Warsh spike, and another shipping read showing crossings moving materially above 25 without toll, inspection, insurance, or security complications.

I would move back toward RED if the Switzerland talks delay becomes a broader implementation failure, if Hormuz crossings stall near current levels, if Brent reclaims $85, if VIX stays above 18, or if Monday’s index tape rejects Thursday’s relief close.

The next catalysts are weekend Hormuz shipping/insurance data, the Monday June 22 U.S. cash-market reopen, the USTR hearing-request deadline on June 22, final Michigan sentiment on June 26, and the tariff comment deadline on July 6.

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Sources: Yahoo Finance - Juneteenth market holiday, RFE/RL - Hormuz traffic rises after U.S.-Iran deal, Trading Economics - Brent crude oil, Trading Economics - WTI crude oil, EIA - Short-Term Energy Outlook, FRED - S&P 500, FRED - Nasdaq Composite, FRED - VIX, FRED - High-yield OAS, FRED - 2-year Treasury, FRED - 10-year Treasury, Federal Reserve - June 17 FOMC statement, U.S. Department of Labor - Weekly claims, U.S. Census - May retail sales, University of Michigan - June sentiment, AP - 10% tariff litigation, ISW - China and Taiwan update