The market is pricing a stagflation shock, not a growth scare. Oil at $97 and the 10-year at 4.837% closed together in the same session, a combination that historically compresses equity multiples fast. The Hormuz interdiction is the dominant macro variable, keeping a floor under crude, a ceiling on bonds, and a question mark over every Fed cut priced for Q4.

Yesterday's tape had one theme: sell stocks, buy anything that survives a war. The S&P 500 fell 0.48% to 7,636, the Nasdaq dropped 0.64%, the Dow shed 0.77%, and the Russell 2000 led the carnage at -1.32%, because small caps have no oil hedge and no Fed put, just vibes and a maturity wall. WTI crude closed at $97.22, up 1.22%, stacking gains on Brent's break above $101, the kind of move that makes airline CFOs update their resumes. The 10-year Treasury yield settled at 4.837%, up 3 basis points, closing in on the highest levels since late 2023, because nothing says "credible inflation fight" like a bond market that refuses to be bought. Gold held firm at $4,435, up 0.43%, quietly doing its one job. The dollar index barely moved at 98.76, the only asset yesterday with the decency to be boring.

The driver is the Strait of Hormuz, again. U.S. CENTCOM strikes disabled three Iranian tankers earlier this week, Iran answered with naval exclusion zone threats and its own tanker interdictions, maritime war-risk insurers pulled Gulf coverage like it was a bad Yelp review, and OPEC+ confirmed it will hold production quotas through October just to make sure nobody feels better. Net effect: 20% of global oil shipments now trade on geopolitical mood, PPI and CPI expectations are re-accelerating, and central banks are back in hiking posture whether they like it or not. Treasury Secretary Bessent expanded the debt buyback facility to $6 billion hoping to cap the 10-year, and the bond market said thanks for the liquidity, still selling. Bonds never bought the rally, and now they are pricing another Fed hike at the September 15-16 FOMC, with interest-rate futures showing an 82% probability of 25 basis points.

For investors, the setup is simple: own things you can touch, skip things that owe you money in thirty years. Energy producers are cashing an enormous windfall: WTI near $97 with Brent above $100 is a margin event, not a headline, for domestic E&P names (XLE, XOP). Gold at $4,435 is not just a war hedge, it is a currency hedge, because the dollar can't collect a rate-differential bid when oil is blowing out the trade deficit at the same time (GLD, IAU). Short-duration Treasuries and T-bills still yield 4.5%-plus and are the only fixed-income position that doesn't bleed when yields rise (SGOV, BIL). Long-duration bonds are a trap here: every TLT holder is fighting the Fed and the oil market at the same time, and losing both fights. Small caps (IWM) remain the most exposed: high refinancing costs, energy input sensitivity, and a safe-haven bid of exactly zero.

Going into today, S&P futures are up a token 0.11% and Dow futures +0.19%, while Nasdaq futures sag -0.11%, because tech multiple compression doesn't take days off. The Hang Seng dropped 1.27% overnight and the ASX fell 1.03%, both pricing the same Gulf escalation and rate-hike math everyone else is. Europe is flat, wisely waiting to see what New York does before committing to an opinion. The 8:30 AM ET Durable Goods Orders print is today's swing factor: a weak number confirms the stagflation thesis and drags equities lower, a beat on capital spending buys industrials one good news cycle. Watch whether the 10-year yield holds below 4.85% into the release. A breach there means the bond market has stopped waiting for the Fed and started making its own decisions.