Master And Commander-In-Chief
By Benjamin Picton, senior market strategist at Rabobank
April – 2026. The IRGC is master of the Strait of Hormuz. Only the American fleet stands before them. Oceans are now battlefields.
Financial markets are back in a risk-off mood today following news over the weekend that US-Iran peace talks ended without agreement and a statement by CENTCOM that the United States will be initiating its own blockade of the Strait of Hormuz from today. President Trump took to Truth Social to say that he has instructed US forces to “interdict” every vessel in international waters that had paid a toll to Iran, while also threatening that any Iranian who fires upon US or peaceful vessels will be “blown to hell”.
10-year bond yields in Australia and New Zealand have leapt 6-7bps in early trade, Asian equities have opened mostly lower, US equity futures are pointing toward losses of around 1%, and front-month Brent crude futures are up by almost 8% to $102.69/bbl. Brent crude for immediate delivery closed down almost $6 at $125.88/bbl on Friday, but is sure to jump today as the market contemplates the loss of Iranian export volumes and a potential re-start of the war.
The US Dollar spot index is trading firmer this morning and both the CAD and NOK are holding up comparatively well as markets again countenance higher-for-longer energy prices. The Euro is 0.32% lower early in the Asian session despite news over the weekend that Peter Magyar’s comparatively pro-EU Tisza party has comprehensively defeated incumbent Viktor Orban’s Fidesz party – securing a two-thirds majority in the 199 seat parliament.
While moves on the Bloomberg screen this morning are not particularly suggestive of massive dislocations underway, the implications of the weekend’s events are potentially much more serious than the price action is letting on.
RaboResearch’s Global Strategist Michael Every writes:
When Trump first threatened Greenland, we argued Europe’s inability to resist such a US advance underlined its decline since 1956’s Suez Crisis, at US hands, first revealed that European powers were no longer ‘Great’. The Greenland episode made the EU look like the Egypt of 1956.
When this Iran War loomed, we asked if the US was still the same Power as in 1956 or had also slid to become like then UK/France, with markets (or countries) able to force it into retreat. We underlined repeatedly that this outcome, which some wrongly saw as a market-friendly TACO, would open a Pandora’s Box for western assets as the foundation of US hegemony on which they are built crumbles.
For that reason, we argued the US would continue to escalate to try to deescalate on its terms, especially as the recent ceasefire had left Iran in control of its enriched uranium and control of the Strait of Hormuz – an intolerable situation. Indeed, we also made clear that things would get worse, geopolitically, before they got better – which naturally risked that we just went ‘off the cliff’ instead.
On Saturday, the collapse in peace talks over the nuclear, Hormuz, and Iran proxy issues revealed that the gulf between the parties to negotiation is as wide as the Persian Gulf through which very little energy, fertiliser, sulphur, or helium is currently flowing.
In response, and in addition to the 50% tariff announced last week against states arming Iran, Trump announced renewed sanctions vs Iranian oil at sea and against any country paying a toll to Iran to get energy. He also played his ‘trump’ card of a US naval blockade of Hormuz to take effect from 10am EST today. Having sent two Arleigh Burke destroyers through the Strait over the weekend, the US will now begin actions to clear any marine mines, thereby removing a key obstacle to the resumption of commercial shipping that Iran claims it has no capacity to remove itself.
The US blockade isn’t aimed at stopping GCC energy and goods flowing, which they aren’t anyway, but will stop Iran exporting energy, or importing food, industrial parts, or weaponry by sea. The economic impact will be enormous, and in around 13 days, Iranian oil storage will be full, forcing well shut-ins and risking permanent supply-side damage. The political goal is clear: force the Iranian regime faction negotiating with the US to destroy those which oppose the US peace deal; and/or incentivise the Iranian population to rise up against the regime again.
Yet the loss of another 2m Iranian barrels of oil a day is a huge blow to the world economy. In that, the US geopolitical goals are: (1) to get reluctant allies to step up and help reopen Hormuz by force; and (2) to force China to step in and help lean on Tehran to submit. (Recall our 2026 financial markets outlook in October 2025, ‘Who has the cards?’, argued the US ace in this realpolitik poker was to use its global military reach to disrupt upstream commodity supply chains heading to rivals and take control of energy – a hand it already played early in 2026 in Venezuela.)
On one hand, US escalation might work. Yet unless Iran were to crumble quickly, the prospect is of an even deeper global energy crisis ahead first. Indeed, de-mining Hormuz, to say nothing of dealing with drone and missile attacks, could take many weeks (faster with allies like Japan, for instance) when the energy damage being done already risks becoming exponential daily.
Yet Iran can also escalate. If they force a ship through the blockade or fire at the US, the current ceasefire breaks down and war is back. Moreover, despite reticence to act so far, the Iran-proxy Houthis could block the key Bab-el-Mandeb chokepoint and perhaps the entire Red Sea. That would risk stripping out another 7m barrels a day of Saudi oil flows, making everything exponentially worse.
Moreover, other parties can escalate. US allies could walk away from Trump at an even higher economic and geopolitical price (on the latter, the US approach is clearly, ‘To the winner the spoils, to the spoilers, no wins). China could use economic coercion on US supply chains; or send an oil tanker through Hormuz, thereby risking blowing up US-China relations or forcing the US to ‘blink’ on the blockade; and some sources allege, it is sending military aid, which USTR Greer has said would make the upcoming Xi-Trump talks aimed at trade detente more difficult.
As such, the US Hormuz blockade is short term bullish for energy prices, bearish for world growth and, at worst, risks questions moving from ‘1956?’ to ‘1962?’, which is when we saw the US-USSR Cuban Missile Crisis. Again any TACO from there would merely take us back to 1956, which is not anywhere a rules-based order in reality underpinned by US military power arguably needs to be. Our base case Hormuz scenario (an end to hostilities by mid April and slow re-opening of the Strait thereafter) is hanging on by its finger nails for now, but may soon need to be revised in a more bearish direction.
Ironically, in the weekend’s Hungarian election result Brussels and EU capitals may see parallels to 1956’s Hungarian Uprising. Magyar’s defeat of Orban potentially removes a major internal obstacle to EU efforts to deal with the conflux of geopolitical and geoeconomic crises plaguing it. That said, Magyar is hardly a Eurocrat. Like Orban, he too is socially conservative, anti-immigration, and sceptical of Ukraine. Further EU-Budapest tensions may yet lie ahead, while Czechia and Slovakia are still Orban-esque in their own right.
Prior to jetting off to Islamabad for the Iran negotiations, US Vice President Vance had been in Hungary to support Orban’s campaign for re-election. The election outcome also shows – once again – that a muscular ‘America First’ message doesn’t sell well outside of the US. That doesn’t mean the policy stops: it just risks more global fragmentation. Allies are already souring on US links and – in some cases (Canada and Spain, for example) – contemplating deeper engagement with the US main strategic rival: China.