Will Stocks Jump First After the War?...Examining the Impact of the Strait of Hormuz Reopening [Weekend Money]

WTI Oil Prices Expected to Fall into the $70 Range
Easing Inflationary Pressure and Stabilizing Bond Yields
Dollar Weakens, Asian Currencies Set to Recover

If a peace agreement is reached between the United States and Iran, leading to the reopening of the Strait of Hormuz, significant positive ripple effects are expected for the global economy and financial markets.

According to iM Securities on May 31, the reopening of the Strait of Hormuz would first alleviate concerns about crude oil inventory shortages in global markets, including Europe. Although it would take considerable time for oil supply chains to fully return to their pre-war levels, even the expectation of easing supply chain disruptions is likely to cause a sharp decline in international crude oil prices. Based on West Texas Intermediate (WTI), oil prices are expected to fall to at least the high $70s to mid-$80s per barrel.

A drop in oil prices would ease inflationary pressures and help stabilize government bond yields. Even if yields do not plunge, they are expected to show at least a gradual downward trend. The significantly reduced risk of additional interest rate hikes by major central banks, including the U.S. Federal Reserve, is considered a positive factor for stabilizing government bond yields.

In the foreign exchange market, the U.S. dollar is expected to weaken, while Asian currencies are likely to turn stronger. Since the Iran war, major Asian currencies—excluding the Chinese yuan—such as the Korean won, Indian rupee, Indonesian rupiah, Thai baht, and Philippine peso, have experienced relatively sharp depreciation. The reopening of the Strait of Hormuz is anticipated to play a positive role in supporting Asian currencies.

Park Sanghyun, a researcher at iM Securities, stated, "If the reopening of the Strait of Hormuz breaks the vicious cycle of high oil prices, high inflation, and high interest rates, and shifts the cycle to a virtuous one, it will serve as upward pressure for various risk assets."

This content was produced with the assistance of AI translation services.