by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment today opens with an update on the war in Iran, where a tanker loaded with Iranian cargo has passed through the Strait of Hormuz today to challenge the new US blockade on the country. We next review several other international and US developments with the potential to affect the financial markets today, including data showing a marked decline in China’s trade surplus and Canadian Prime Minister Carney’s success in finally cobbling together a majority in his country’s parliament.

United States-Israel-Iran: Less than a day after the US began enforcing its blockade against Iranian ports, reports today say Saudi Arabia is urging the US to reverse course. According to the reports, the Saudis fear Iran will carry out its threat to retaliate against the blockade by attacking ports in Saudi Arabia and elsewhere in the region or closing the Bab el-Mandeb — a Red Sea chokepoint crucial for the kingdom’s remaining oil exports.

• In an early test of the blockade, the shadow-fleet tanker Elpis this morning passed through the Strait of Hormuz after taking on a cargo in Iran. The transit of the Elpis is likely intended to see just how strongly the US will enforce its blockade. As of this moment, we’ve seen no indication of whether the US Navy will stop the ship or not.
• New reports say one key point of contention in the talks to end the war is that the US is insisting on a 20-year moratorium on Iran’s nuclear activity, including uranium enrichment. In response, Iran is insisting it will not commit to more than five years. While that sounds like an unbridgeable gap, it does suggest that an eventual compromise could be reached with a moratorium somewhere in the middle, such as 10 years.
• Separately, the Organization of the Petroleum Exporting Countries said oil production in March was down 27.5% to just 20.8 million barrels per day, marking the biggest OPEC output drop on record. The decline in production illustrates how dramatically the war has disrupted output and exports in the region.
• Meanwhile, the International Energy Agency today said global oil demand fell 3.4% in March and is expected to drop a further 1.1% in April to just 100.4 million barrels per day, reflecting price hikes and supply disruptions from the war in Iran. Excluding the coronavirus pandemic, the quarterly drop in demand was the steepest since the Great Financial Crisis and will leave demand at its lowest in more than three years.
• Even as the US and Iran engage in negotiations to end the war, commentators in recent days have increasingly warned that Israel’s effort to create strategic buffer zones in southern Lebanon, Syria, and Gaza could lead to it being involved in “forever wars” similar to the US experience in Iraq and Afghanistan. If such a scenario comes to pass, it could threaten social cohesion in Israel and tarnish the country’s hard-won reputation as a rising star in stock sectors such as technology.

China: The March trade surplus totaled just $51.0 billion, less than half the surplus in March 2025. Exports in March were up just 2.5% on the year, slowing sharply from the 22.0% rise in January and February. The slowdown in exports reflected not only the continued fall in Chinese exports to the US, but also a decline in shipments to the Middle East because of the war in Iran. Meanwhile, Chinese imports in March were up 28.0% year-over-year, accelerating from their increase in January and February. In sum, the data points to more economic headwinds.

China-Philippines: The Philippine government today said it found cyanide on Chinese boats seized around a disputed shoal where Manila had grounded a warship to use as a base and assert its sovereignty. According to Philippine officials, it appears that the Chinese planned to poison the local fish population to deny a vital food source for the troops on the grounded ship and also weaken the reef supporting the vessel. The incident could signal renewed China-Philippine territorial tensions in the South China Sea and a renewed risk of conflict.

Singapore: Citing higher energy prices caused by the war in Iran, the Monetary Authority of Singapore yesterday said it would allow the country’s currency to appreciate more than previously expected, essentially implementing a tightening of monetary policy. That marked Singapore’s first monetary tightening in approximately four years. The move will likely threaten to slow economic growth in Singapore and could weigh on the country’s stock prices.

Canada: In by-elections yesterday, Prime Minister Carney’s Liberal Party was expected to win enough seats to take a slim majority in the national parliament. Carney was also able to convince several lawmakers to switch parties to join the Liberals in recent months. If Carney is successful in achieving a majority for the Liberals, he would be more likely to pass economic reforms that could help Canada weather the US administration’s tougher trade policies against Canada.

US Economic Growth: New studies from Goldman Sachs and Stanford University suggest the boost in consumers’ tax refunds this year will be essentially offset by the rise in energy and other commodity prices because of the war in Iran. As a result, many economists are now tempering their expectations for US economic growth this year. Importantly, while the increased tax refunds will be matched by the rise in energy prices on a macro basis, the research suggests that lower-income households’ refunds will be more than offset by their increased energy costs.

US Electric Utility Industry: New research says a group of 51 investor-owned utilities now plan a combined $1.4 trillion in capital spending in the coming five years, up from a five-year projection of $1.1 trillion just last year. The jump largely reflects a need to upgrade the national power grid for data centers and other facilities related to the artificial intelligence boom. For the utility companies, a key risk is whether state regulators will approve the plans. For consumers, approval of the plans threatens to raise electric rates and boost price inflation.

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