The market is "fluctuating sharply" between two narratives: "The war is almost over" vs "The Strait of Hormuz will be closed for a long time."

``` The crude oil market experienced an “information storm” of mixed bullish and bearish signals on Tuesday. From the release of the U.S. Strategic Petroleum Reserve to remarks from the Iranian president, from the risk of the Strait of Hormuz being blocked to Trump declaring the war is “coming to an end,” oil prices reversed several times within one day, ultimately closing up about 5%. J.P. Morgan traders pointed out that the day's headlines simultaneously supported two completely opposing market narratives: one being an “off-ramp” story of conflict de-escalation and oil price stabilization, and the other a “sustained risk” story of the Hormuz Strait being closed for an extended period. The market swung violently between these two, with oil price volatility rising back to the highs seen on Sunday night. High oil prices continued to suppress the stock market: the S&P 500 closed lower that day, and bonds were also sold off as yields climbed 5 to 8 basis points across the curve. The situation escalated further after the close. According to reports, an oil tanker exploded in the Persian Gulf, pushing oil prices higher and dragging equities down, quickly unraveling the brief “decoupling” seen among stocks, bonds, and oil late in the session. Bullish Signals: Iran Releases Ceasefire Conditions, Reserve Release Lifts Sentiment J.P. Morgan traders regarded a headline at 2:15 p.m. as a key positive signal— Iranian President Pezeshkian tweeted that a ceasefire depends on the U.S. and Israel committing not to launch further attacks. J.P. Morgan saw this as the long-awaited Iranian “exit strategy” signal. According to CCTV News, on the evening of March 11 local time, Iranian President Pezeshkian posted on his social media that the “only way” to end the war initiated by the U.S. and Israel is to recognize Iran's legitimate rights, pay war reparations, and have the international community firmly guarantee the prevention of future aggression. At the same time, the International Energy Agency (IEA) member countries announced their agreement to release 400 million barrels of oil reserves, and this globally coordinated action somewhat eased supply concerns. Trump also issued several dovish comments that day: At 9 a.m. Eastern Time, he declared that the “war with Iran is coming to an end, Iran has almost nothing left;” At 12:15 p.m., he said the US military had destroyed almost all Iranian minelaying vessels; At 12:30 p.m., he said oil companies should use the Strait of Hormuz; At 1 p.m., he promised to give “full security guarantees” to oil tankers passing through the Strait of Hormuz. These statements repeatedly pressed oil prices lower in the short term, showing the market’s expectations for de-escalation of the conflict still have some flexibility. Bearish Signals: Continued Bombing and Weeks Needed to Coordinate Convoy Operations However, bears also had plenty of arguments. J.P. Morgan traders pointed out that military strikes in the Middle East were continuing—U.S. Secretary of Defense Hegseth said it was the busiest day for jet and bomber sorties and airstrikes since the war began. At 3:30 p.m. Eastern Time, large-scale bombing over Israel and Lebanon pushed oil prices to the day's highs. French President Macron's comments also weighed on the market. He said it would “take several weeks” to coordinate convoys for ships passing through the Strait of Hormuz, and that the strait currently remains “too dangerous” for U.S. Navy escorts. According to Xinhua News Agency, on March 11, Macron stated that under the current tense situation in the Middle East, G7 members should coordinate actions to resume smooth navigation in the Strait of Hormuz as soon as possible. Citing French media, he said based on intelligence from France or its partners, he could not confirm whether Iran had laid mines in the Strait of Hormuz. In addition, the U.S. FBI reportedly warned that Iran might launch a drone attack on California. This news immediately pushed oil prices sharply higher and stocks lower. After the close, the oil tanker explosion in the Persian Gulf further heightened the real risk of supply disruption, tilting the balance of risks back toward the bearish side. Tail Risk: Right-Side Short Squeeze Could Break Out Any Time Despite the current bearish market sentiment, Goldman Sachs partner John Flood warned in an interview that there are also risks of a sharp move higher. He pointed out that total hedge fund leverage is currently near historical highs, mainly driven by macro products (indices and ETFs) adding to short positions. According to Goldman Sachs prime brokerage data, the proportion of US macro product short exposure as a percentage of total US market capitalization is at its highest level since September 2022, ranking at the 93rd percentile over the past five years. “If a headline declaring an end to the conflict appears, the indices could spike 2% to 3% in a straight line, most of it coming from short covering in macro products,” Flood said. Meanwhile, market liquidity is thinning—ETFs have made up more than 35% of daily market turnover for seven consecutive sessions, close to the 10-day streak seen during the 2020 COVID-19 pandemic. Flood warned that inadequate liquidity will further intensify stock market volatility in the coming weeks. Risk Warning and Disclaimer The market is risky, and investment requires caution. This article does not constitute personal investment advice and does not take into account the individual investment goals, financial situation, or needs of any particular user. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular situation. Investing based on this is at your own risk. ```