Iran signals hardline stance on blocking Hormuz…oil surges, New York stocks tumble at close [Morning Briefing]

◆ Oil jumps on Iran’s resolve to block the Strait of Hormuz…Brent closes above $100

International oil prices surged again on the 12th (local time) after Ayatollah Seyyed Mojtaba Khamenei—elected as Iran’s new Supreme Leader—declared an ultra-hardline response toward the United States and Israel, including blocking the Strait of Hormuz. On the day, May-delivery Brent crude futures on ICE Futures Europe settled at $100.46 a barrel, up 9.2% from the previous session. Brent, the global benchmark, had also traded above $100 a barrel intraday on the 9th, but it was the first time it closed above $100 since August 2022—3 years and 7 months ago. On the New York Mercantile Exchange, April-delivery West Texas Intermediate (WTI) crude futures settled at $95.73 a barrel, up 9.7% from the previous session.

In his first official statement aired on state TV, Mojtaba said, “We must continue to use the leverage of blocking the Strait of Hormuz as a means to pressure the enemy (the United States and Israel).” He also said, “A review of forming a ‘second front’—one the enemy has not experienced and is vulnerable to—has been completed,” signaling an intent to shift from a defensive posture to an offensive one and broaden the front. With Iran’s top leader formally signaling a willingness to pressure the U.S.-led West by holding hostage a strategic chokepoint through which 20% of global crude flows pass, concerns that the Hormuz blockade could last longer than expected pushed oil prices higher.

◆ New York stocks sink on hardline message from Iran…close sharply lower

All three major U.S. stock indexes fell more than 1%. With Iran’s military stepping up the intensity of attacks in the Strait of Hormuz and the Gulf waters, the hardline message from Ayatollah Seyyed Mojtaba Khamenei—elected as Iran’s new Supreme Leader—added to market anxiety. On the 12th (local time), the Dow Jones Industrial Average closed down 739.42 points (1.56%) at 46,677.85. The S&P 500 fell 103.18 points (1.52%) to end at 6,672.62. The Nasdaq Composite slid 404.16 points (1.78%) to close at 22,311.98.

With the Donald Trump administration unable to find a solution to the Hormuz blockage, ultra-hardline messaging from Iran’s leadership further dampened investor sentiment. As surging oil stoked inflation concerns, the U.S. 2-year Treasury yield jumped 12 bp. Markets priced in the risk that inflation could derail the Federal Reserve’s rate path. With both oil and U.S. Treasury yields spiking, equities could not avoid the shock. After opening with a gap down, the three major indexes never turned higher intraday and finished lower. Both the tech-heavy Nasdaq and the Dow—dominated by blue chips and cyclical stocks—fell more than 1%.

◆ White House rattled by oil shock weighs 30-day waiver for ‘U.S.-flag ships only’ port-to-port rule

As energy prices rise in the wake of the Iran war, the White House is reviewing a plan to temporarily exempt regulations requiring that cargo transported between U.S. ports be carried only on U.S. vessels. According to The Washington Post (WP) on the 12th (local time), White House Press Secretary Karoline Leavitt said in a statement, “For national security, the White House is considering temporarily waiving the Jones Act to allow essential energy products and agricultural goods to flow freely into U.S. ports.” Bloomberg, citing people familiar with the matter, reported that a 30-day waiver is under review and would cover crude oil, gasoline, diesel, liquefied natural gas, and fertilizer.

The Jones Act, enacted in 1920, requires the use of U.S. vessels to transport goods between U.S. ports. If the law is waived, foreign ships—as well as comparatively smaller U.S. vessels—would be able to carry energy products including oil between U.S. ports. With an official statement under the press secretary’s name confirming the review, expectations are growing that a temporary Jones Act waiver could soon become reality. The waiver appears to be under consideration as a measure to ease the impact of a sharp oil rally driven by the Iran war. With the Strait of Hormuz effectively blocked, gasoline prices in the United States have also risen sharply, adding to the burden on the Donald Trump administration. In particular, President Trump pledged to lower oil prices ahead of the 2024 presidential election, and with the midterm elections in November—historically a difficult contest for the party in power (including elections for federal senators and representatives)—the need to manage oil prices is growing. Some also project that even if the Jones Act is temporarily suspended, the benefit to U.S. consumers may be limited.

◆ PM Kim Min-seok meets U.S. Vice President Vance…“exchanged views on overall Korea-U.S. ties”

Prime Minister Kim Min-seok met U.S. Vice President JD Vance in Washington, D.C., on the 12th (local time) and exchanged views on overall Korea-U.S. relations, the Embassy of the Republic of Korea in the United States said. It was Kim’s first meeting with Vance in about a month and a half since they met during Kim’s trip to the U.S. on January 23. The two appear to have assessed the situation in which the Special Act on Investment in the United States—providing legal backing for Korea’s $350 billion investment in the U.S.—passed the National Assembly plenary session that day with bipartisan agreement, and discussed ways to implement future Korea-U.S. trade agreements. In particular, Kim is believed to have stressed that the Section 301 investigation launched the previous day by the Office of the U.S. Trade Representative (USTR) against 16 economic entities including South Korea, China, and Japan should not work against South Korea. They are also presumed to have exchanged views on maintaining the Korea-U.S. alliance’s deterrence against North Korea amid the Iran war, and on the possibility of U.S.-North Korea dialogue ahead of U.S. President Donald Trump’s planned visit to China later this month.

◆ Up to 20 cm of snow in Gangwon’s mountains…morning low ‘-2°C’

On Friday the 13th, the country will be mostly cloudy, with heavy snow in the mountainous areas of Gangwon Province. For the time being, morning temperatures will remain below freezing and the day-to-night temperature swing will be large. According to the Korea Meteorological Administration, rain or snow is expected through the afternoon, mainly along the east coast and mountain areas of Gangwon and along coastal areas of the Gyeongsang region. Forecast snowfall by region is: △Gangwon mountains 5–15 cm (up to 20 cm or more in some areas) △Gangwon east coast 1–3 cm △Ulleungdo and Dokdo 3–8 cm △northeastern mountains of North Gyeongsang 1–5 cm △northern east coast of North Gyeongsang and Ulsan less than 1 cm. Forecast precipitation by region is: △Gangwon 5–20 mm △Gyeongsang region 5–20 mm. Temperatures will be similar to seasonal norms (low -4 to 4°C, high 9 to 14°C) for the time being. The morning low is forecast at -2 to 4°C, and the daytime high at 6 to 14°C. Winds will blow strongly at around 55 km/h, mainly in Gangwon, the Gyeongsang region, and Jeju Island. Fine dust levels are expected to range from “Good” to “Moderate” nationwide, though Chungcheongnam-do, the Honam region, and the Jeju region may briefly see “Bad” levels at dawn.

Kim Ye-rang, Hankyung.com reporter yesrang@hankyung.com