Last week we said $100 was back in range. The market went the other way on a workaround rather than a settlement. On Tuesday Iran's deputy foreign minister announced that Iran and Oman had agreed a temporary route through Hormuz: a northern inbound lane through Iranian waters and a southern outbound lane in Omani waters, coordinated with Iran, for two to four months or longer, plus a joint mine-clearing project. Tehran said the strait will not fully reopen until the US honours the lapsed June memorandum. On the US side, Washington launched "Operation Economic Outcast" against Iran's economy, and US strikes have halted.
That was enough to take several dollars of premium out. Brent settled Friday at $89.31 (−$0.39) and WTI at $83.40 (−$0.13), down 5.4% and 4.2% on the week respectively. The US blockade has cut Iran's own crude exports by more than 80%. Gulf exports overall remain well below pre-war levels, and a temporary lane that Iran controls does not solve that. Six months into the war, crude is pricing somewhere between blockade and corridor, and it moves on every headline.
An Iran–Oman temporary Hormuz lane and a halt to US strikes cut Brent 5.4% to $89.31. It is a workaround Iran controls, not a reopening, and Tehran still ties full access to the lapsed MoU. Expect crude to keep moving on headlines within a wide range.
The question was whether Bitcoin could hold its breakout. It did, under pressure. The rally paused early in the week after a 23% seven-day run, then Friday tested it: BTC traded as high as $81,500 on Friday, the day of Warsh's Jackson Hole keynote. Warsh said that while "this summer's inflation readings were better than expected, they do not tell me that underlying trends have meaningfully improved," and that the Fed has "work to do". Short-dated yields jumped and CME FedWatch moved to about a 60% chance of a September hike. BTC fell as low as $76,859 on the day.
It closed Friday at $77,843 on Crypto.com's daily candle, down only 0.6% on the week and holding almost all of the prior week's 24% gain. ETH was weaker, closing at $2,443 (−2.9%), which left ETH/BTC near 0.031. A hawkish Fed chair signalling a possible hike would have broken the June market. This market absorbed it within a few percent. The Clarity Act is still the upside catalyst. The downside risk is now a September hike that the market is roughly 60% priced for.
Warsh's Jackson Hole warning pushed September hike odds to ~60%, and BTC still closed at $77,843, −0.6% on the week, after touching $81,500. The breakout held. The risk now is a September hike, and the market is only about 60% priced for it.
A holiday-shortened week went nowhere. Tuesday, August 25, was a market holiday. The JCI fell to 6,405.69 on Wednesday, rebounded about 116 points to 6,521.75 on Thursday, and closed Friday at 6,518.12, down 0.12% from last week's 6,525.69. Thursday's rebound coincided with demonstrations outside the national parliament on August 27 passing off peacefully, which Kontan noted the market took well.
The rupiah was steady too. It weakened to 17,744 on Thursday, then firmed 51 points on Friday to 17,693, unchanged on the week. It ended August well below the 18,022 of July's close, on a softer dollar and BI's steady 5.75% policy rate. MSCI's August rebalance takes effect at Monday's close, with CPIN and GOTO leaving the Standard index. The index held 6,500 through a week of Fed and oil noise, and the currency is holding its gains.
The JCI held ~6,500 (6,518, −0.12%) in a holiday-shortened week, and the rupiah finished August at 17,693, well below July's 18,022. Consolidation, not distribution. Watch index flows at MSCI's rebalance, and the dollar ahead of the Fed's September decision.
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