Hormuz Opens, Oil Crashes, Gold Surges: The Reversal Week

US equities surged to new records on the peace-driven oil reversal. The Dow's transportation-heavy components, which had been under margin pressure from diesel costs, led the recovery. The risk triangle that had been suppressing equity sentiment (yields + oil + geopolitics) lost two of its three legs in one session. Volume confirmed the move.

Price action suggests: Breakout acceptance at new highs with breadth participation, though durability depends on whether the ceasefire holds.

Gold surged to $4,868 on Friday, up 1.47% on the day and posting a fourth straight weekly gain. The mechanism is clean: oil collapse eases inflation expectations, rate-cut pricing returns, real yields fall, dollar weakens. All four tailwinds working simultaneously, reversing the exact forces that crushed gold in March. Central bank buying continues at pace, and India supply constraints are tightening physical markets.

Price action suggests: Strong recovery toward the $4,800-$4,900 range, with fourth weekly gain showing structural demand rather than headline-chasing.

WTI crashed over 10% on Friday alone to under $85, its biggest single-day decline since the pandemic liquidation in April 2020. The ceasefire and Hormuz opening announcement obliterated the war premium. But the physical market is not caught up yet: ING warns that actual tanker traffic is still far below normal, with 230 loaded oil tankers waiting inside the Gulf. The paper price has moved on hope; the physical price has not fully followed.

Price action suggests: Sharp rejection of the entire $100+ range with acceptance moving lower, though the gap between paper and physical pricing signals caution on follow-through.

The euro pushed toward 1.178 as dollar weakness accelerated and Europe's acute energy vulnerability started to unwind. Falling oil is disproportionately good for Europe, which was the most structurally exposed to the Hormuz disruption. The ECB's dovish tone on inflation has kept upside limited, but the energy relief trade is clearly supporting the pair.

Price action suggests: Upside structure forming as the energy relief trade favors EUR over USD. Approaching the 1.18 level with momentum.

Sterling continued its recovery as the energy headwind that had been hammering the pound through March and early April reversed. UK inflation forecasts of 5%+ were premised on sustained oil above $100. With crude below $90, that calculus changes materially. The BoE's path remains on hold, but the urgency around inflation-driven damage to the UK economy has softened.

Price action suggests: Recovery gaining traction with the lower-high pattern from recent weeks being tested as a potential base.

The pair held near 159.20, with the yen finding some relative support as oil's decline eased Japan's import bill pressure. The yen is approaching the 160 intervention threshold, which historically triggers verbal and sometimes direct intervention from the BoJ. The carry trade remains supported by the persistent rate differential, but the energy trade balance tailwind for the dollar has weakened.

Price action suggests: Consolidation near 2026 extremes with intervention risk capping further upside. The energy dynamic has shifted from headwind to neutral for the yen.

The loonie's dynamic shifted this week. Oil's 10% crash is typically CAD-negative because Canada's export revenues are energy-heavy. But the broad USD weakening provided an offset. The pair is now reflecting a cleaner balance between Canada's commodity exposure and the global dollar trajectory, rather than last month's war-driven distortions.

Price action suggests: Settling into a two-way trade with the war-premium distortion removed. Oil direction will dictate the next leg.