It’s yet unclear how much damage the US has done – Trump says they’ve caused ‘monumental’ damage. Now, the world is holding its breath to see how Iran will respond.

The country said that ‘all options’ are on the table – including trade disruptions through the Strait of Hormuz, where 20% of global oil and gas flows transit. This could involve blocking the canal or attacking commercial ships, as the Houthis do. Another option could be striking nearby oil facilities – similar to the 2019 attack on Saudi Abqaiq that knocked out 7% of global oil supply.

But many remain optimistic that Iran will avoid a full-blown retaliation and regional chaos, to prevent its own oil facilities from becoming targets and to avoid a widening conflict that could hurt China – its biggest oil customer. So some think – and trade the idea – that the threat of disruption to oil trade will not materialize.

So, US crude opened the week at $78pb, but didn’t climb beyond $78.60 before sliding toward $76pb. Brent didn’t even reach the $78pb mark, while nat gas is up by less than 1% at the time of writing.

So far, satellite images reportedly suggest that oil continues to flow through the Strait, which may explain the muted market reaction to the news. Still, two supertankers – each capable of carrying 2 million barrels of oil – made a U-turn to avoid the region, according to Bloomberg. The Persian Gulf has been increasingly jammed since June 13th, tanker fees are soaring, and the US has issued warnings to the broader region, hinting that more action may be coming.

If things get uglier and Iran retaliates in a way that disrupts global oil and gas flows, the price of US crude could spike above the $100pb level. Top-selling plays on oil price jumps driven by geopolitical headlines look like the major trade of the moment. But holding a short position beyond a few hours is probably too risky. Setting stop-loss and take-profit levels could help limit risks in an increasingly uncertain geopolitical environment.

It’s worth remembering that it would take a few days to a few weeks to meaningfully disrupt global oil flows – and a weakened Iran, if left with no other options, could still go down that road.

A sustainable jump in oil prices – and by sustainable, I mean a rise to around $100pb for a few months – could have wider implications for the global economy by boosting inflation and preventing central banks from further easing. That, in turn, would weigh on production, business activity, and growth.

Therefore, global equities will likely remain under pressure at the open – but judging by how oil prices reacted to the weekend news, the selloff could remain relatively soft compared with the heaviness of the headlines. S&P futures are down about 0.30% – they’re behaving like a normal Monday. And that, I find extremely interesting. It really feels like markets have become increasingly unreactive to the news. The lack of reaction is fascinating.

Beyond oil, the US dollar jumped at the open, but gains remain relatively small. The US 10-year yield is softening, gold is giving back earlier gains, and the Swiss franc is not necessarily stronger – on the contrary. Traders are taking advantage of levels below 1.15 to flock back into the euro. Cable is bid into its 50-DMA. But the Asian majors are under greater pressure: the USDJPY, for example, jumped past its 100-DMA and is trending higher despite the softening in the US dollar after the initial spike. Meanwhile, the AUDUSD – which has decent exposure to China – slipped below its 200-DMA and remains under pressure, even though the broader market is not showing particular signs of stress.

Geopolitical tensions will remain top of the headlines this week. For those interested, there will be a set of PMI releases across Europe and the US today. Federal Reserve (Fed) Chair Jerome Powell will deliver his semi-annual testimony before Congress – and will probably say little more than “we don’t know what will happen amid high trade and geopolitical uncertainty, so the best approach is to wait and see.”

We’ll also watch the fresh US GDP update – expected to point to a solid decline in Q1 sales alongside sustained price pressures. By the end of the week, Japan and major Eurozone economies will release their latest inflation data. The relevance of those inflation prints will depend on the size of oil price movements. For now, they don’t look threatening. But oil prices have jumped more than 20% compared with pre-Iran tensions – and that’s something to keep an eye on.