Strait of Hormuz: Shipping Disruption, Oil Prices, and Market Reactions
Market Overview and Key Developments
May 4 (Reuters) - A look at the day ahead in European and global markets from Wayne Cole.
Strait of Hormuz Shipping Crisis
A new week and we're back to Strait watching. That's the Strait of Hormuz and everyone's a shipping expert these days. So President Trump surprised this morning by posting the launch of Project Freedom to help the around 900 ships caught inside the Strait exit past the Iranians.
He was short on detail but U.S. Central Command helpfully issued a brief media release saying it will support merchant vessels seeking to freely transit through the essential international trade corridor.
Military Intervention and Convoy System
Notably CentCom says this will include guided-missile destroyers, over 100 land- and sea-based aircraft, multi-domain unmanned platforms, and 15,000 service members, suggesting some sort of military intervention in the Strait to get the ships out.
Perhaps a convoy system, though it's not clear the Navy has enough ships, or the right kind of vessels, for such an operation.
It would also be very difficult, not to mention dangerous, to run a convoy system through such a narrow waterway with Iranian forces holding the entire northern shore of the Gulf. According to Trump, the operation is due to start today, and so far markets are reserving judgement.
Uncertainty for Shipping and Market Response
Indeed, an Axios report said the operation would not necessarily involve Navy ships escorting private vessels. It was also unclear whether ship owners and crews would dare sail the strait given reports of two ships being attacked since Sunday. Looking at the various ship tracking web sites, there's no sign of vessels lining up to try their luck.
The latest data show on 2 May, 12 ships crossed the strait — five inbound and seven outbound — compared to a daily average of 138 before the conflict.
Oil Prices and Financial Market Reactions
Thus, after falling more than 2% initially, Brent has come back to almost steady at $108 a barrel, with U.S. crude just short of $102. European and U.S. stock futures are a whisker firmer, and the dollar little moved.
Corporate Earnings and Economic Data
Markets are braced for more than 100 earnings reports this week. Companies reporting include Advanced Micro Devices, Super Micro Computer Inc, Palantir, Walt Disney and McDonald's. AMD will have to sound bullish to justify the 80% rise in its share price over recent weeks.
Upcoming Economic Reports
For data, U.S. trade figures, ISM services, JOLTS, jobless claims and ADP employment all lead up to the payrolls report on Friday. Median forecasts are 4.3% and a rise of 60,000, though seasonal adjustment problems mean estimates go from -15,000 all the way up to +135,000.
A very weak report would be needed to revive the chance of a Fed rate cut this year, given the three dissents on the FOMC against an easing bias last week. The influential NY Fed chief John Williams will have a chance to lay out his thinking later today. Several ECB and BoC officials will also speak on Monday.
Central Bank Actions and Key Events
Australia's central bank meets on Tuesday and is considered likely (around 80%) to raise cash rates by 25 bps to 4.35%, the third straight hike.
Key Developments to Watch
Key developments that could influence markets on Monday:
- Participation by ECB President Christine Lagarde and ECB board member Piero Cipollone in Eurogroup meeting in Brussels
- Presentation of the ECB Annual Report 2025
- Appearance by Bank of Canada Governor Tiff Macklem and Bank of Canada Senior Deputy Governor Carolyn Rogers
- Federal Reserve Bank of New York President John Williams gives a keynote address
(By Wayne Cole; Editing by Jacqueline Wong)
