Tonight, our entire team is in a meeting to talk about the Strait of Hormuz blockade and its potential impact on global financial markets. We will try to explain it in a simple and understandable way, mainly involving the impact of inflation and related investment opportunities 🛢️ What does the blockade of the Strait of Hormuz mean? Imagine: the major artery of global oil has been choked. The Strait of Hormuz is one of the most important energy transportation channels in the world. About 20% of the world's crude oil and 30% of liquefied natural gas (LNG) have to pass through here. This strait is like the throat of an "energy highway", only a few dozen kilometers wide. Once blocked, global oil and gas supply will immediately be "choked". 💥 Once blocked, oil prices skyrocket! If Hormuz is really sealed off and oil tankers cannot leave, the market will immediately panic, supply and demand will be tense, and the soaring oil price is an inevitable result. Now the oil price has risen by 35% from the low point in April, and it hasn't happened yet. If the conflict really escalates, according to a report from JPMorgan, oil prices may surge to $120-130 per barrel in one go. 📈 What is the impact of rising oil prices on inflation? Here is a key data: for every 10 points increase in oil prices, the Federal Reserve estimates that CPI will rise by 0.2% (20 basis points). Now it has risen by almost 20, theoretically driving inflation by 0.4% (40 basis points). If oil prices rise to 120-130 as predicted, inflation may break through 5% again. And we all remember that the last time CPI reached 5% was in 2023, when the Federal Reserve was still raising interest rates! 💡 What will the Federal Reserve do if inflation is high? This is crucial. The market was originally expecting the Federal Reserve to cut interest rates twice this year, starting in September. But the rise in oil prices leading to a rebound in inflation is equivalent to "blocking" this path: lowering expectations of interest rate cuts is negative for the stock market, especially technology stocks; If inflation worsens, the Federal Reserve may even reconsider the possibility of raising interest rates, or at least maintain high interest rates for a longer period of time; The bond market will also be tight, and US bond yields may rise. 🧨 Not only oil prices, but also geopolitical risks will comprehensively drive up market volatility Blocking the strait is not a simple economic issue, but a signal of geopolitical escalation, which means: one ️⃣ Global risk assets are impacted (stock market safe haven, gold rising, VIX volatility rising); two ️⃣ The income of Middle Eastern energy countries has surged, but the cost pressure on global importing countries has increased; three ️⃣ Safe haven assets are rising, such as gold, US Treasury bonds, and possibly BTC, as Dubai tycoons in the Middle East are relatively close to the Strait of Hormuz. 📊 How should investors respond? If you are an investor, now you need to understand: this is not a small fluctuation in oil prices, this is a moment of "risk repricing" in the global financial system. one ️⃣ Pay attention to crude oil, energy stocks, inflation benefiting assets (such as gold, resource ETFs), as well as Western oil, which Buffett holds a large position in; two ️⃣ At the same time, we need to guard against the pressure of high valuation technology stocks and growth stocks' pullback, as well as the pullback of counterfeit currencies; three ️⃣ Pay attention to the attitude of Federal Reserve officials. If they start to become hawkish, the market may quickly adjust; Suggestion: Due to the increased macro risk aversion and volatility, it is not advisable to heavily invest in a single direction, allocate portfolios, and diversify hedging risks. In short, once the Strait of Hormuz is blocked, it may not only affect the Middle East, but also trigger a chain reaction in the global market. From oil prices, inflation, Federal Reserve interest rate policies, to the stock and bond markets, everything will be affected. Investors must grasp this main line, where defense and opportunity coexist. 🧐