Markets:

• Gold down $143 to $4502
• US 10-year yields up 10 bps to 4.39%
• Silver down 6.7%
• Bitcoin down 0.8%
• WTI crude oil up $2.60 to $98.09
• S&P 500 down 1.7%

I’m not sure if we’re at maximum fear yet but we are close. There was nowhere to hide on Friday as the market increasingly feared a weekend escalation, or worse, saw signs of a quagmire.

In the US morning, Trump called NATO allies cowards and said it will be “so easy” to reopen Hormuz and just before the market close, eh said “you need a lot of help” to reopen it. That kind of talk has the market increasingly believe there is no real plan here and that Trump expected Iran to surrender.

Instead, Iran is insisting on a ceasefire before even talking about opening Hormuz while Trump has rejected that.

It was a bloodbath throughout markets as oil was the oil place to hide. Bonds were beaten up again as the market now sees a 30% chance of a Fed hike this year as one-year implied inflation rates rose to 5.3%.

Naturally, stocks fell with global markets down 2-3% and both the Nasdaq and Russell now down 10% from their hights, a technical correction. The S&P 500 is in its worst four-week loss since the period ending April 18. It was also the worst day in a month.

Gold was caught in the crossfire in the third day of heavy selling. It fell below $4500 for the first time since early February and silver was battered. Both were set to close near the lows.

In the FX market, the US dollar re-asserted itself and recouped some of the decline from yesterday. It was particularly strong in USD/JPY where Japan looks increasingly vulnerable to an inflationary shock from energy prices.

If there’s any silver lining, it’s that sentiment is extremely bad with every commentator talking about oil-maggedon and a protracted closure of Hormuz.