The market optimism from yesterday has been dashed after US president Trump’s address here. There was some anticipation that he would hang the “mission accomplished” banner but it wasn’t really that in the end. While he reaffirmed that Iran’s military capacity has taken a heavy hit, he still says that it could take at least 2-3 weeks to wrap things up.

For markets, that just means that we will get many more weeks of extended uncertainty. And more importantly, it just means that the de facto closure of the Strait of Hormuz will be prolonged. At this stage, every single day matters and another few more weeks of a supply shock to the oil market won’t do anybody any good.

And even then, who is to say that the US can immediately withdraw its presence from the region? That is certainly not going to happen. And what more that even if the war were to end today, some countries might still take weeks or even months to get their energy facilities back up and running at full capacity. And then when you get all of that, who is to say Iran will allow for a straightforward resumption to normality on passage through the Strait of Hormuz?

As mentioned yesterday here, “mission accomplished” doesn’t really do anything unless it comes with the reopening of the Strait of Hormuz.

That is the reality for markets and the reality of the situation for the global economy.

After Trump’s address, we’re now seeing markets sell the fact with worries continuing to mount. Oil prices are surging up again with WTI crude up over 6% to $106.50 at the moment. Brent crude is also up nearly 7% in jumping back above $108 on the day.

Meanwhile, equities are slumping hard with S&P 500 futures down 1.4% and European stock futures bordering on 2% losses ahead of the open later.

In the bond market, 10-year yields in the US are surging again as we see a 6 bps climb to 4.38%. In FX, the dollar is rallying back strongly after losses to start the week. EUR/USD is down from 1.1600 overnight to 1.1520 now while AUD/USD has dropped from 0.6940 to 0.6870 on the day.

This article was written by Justin Low at investinglive.com.