BlockBeats News, July 21st. A new diplomatic window has appeared in the US-Iran conflict. Iran has confirmed receiving a "10-day ceasefire" proposal from the mediator, while Qatar and Pakistan are working to return both parties to the status quo before July 9th to resume the implementation of the previous memorandum of understanding. However, on the same day, the US military carried out airstrikes on Iranian targets for the 10th consecutive day. President Trump openly stated that if Iran causes further US military casualties, they will pay a "much greater price," highlighting that military pressure and diplomatic contacts are still progressing simultaneously.

Of note for the market is that such ceasefire proposals seem more like technical arrangements to buy negotiation time rather than a signal that the conflict is about to end. This is because the core disagreement between the US and Iran still revolves around control of the Strait of Hormuz and maritime security. Iran has explicitly stated that the Strait of Hormuz is vital to its national security, while the US sees the resumption of commercial shipping as one of the main reasons to continue military action. Until substantial progress is made on this issue, the energy supply chain is expected to struggle to return to normal.

A bigger variable comes from the Red Sea. The Houthi rebels have declared a maritime blockade against Saudi Arabia, with Saudi Arabia stating it will take necessary military action to ensure the safety of the Bab el-Mandeb strait. This means that the global market is facing risks on two energy arteries simultaneously: the Strait of Hormuz, responsible for Gulf oil exports, and the Bab el-Mandeb strait, crucial for around 4.9 million barrels per day of Saudi oil exports through the Red Sea. Even if the Houthis do not actually block the waterway, the mere announcement is enough to increase insurance costs, alter vessel schedules, and disrupt shipping expectations.

In addition to energy risks, a new supply shock has emerged from the Black Sea. The Kazakh CPC oil terminal was forced to shut down after another tanker attack, while grain exports from Ukraine and Russia were simultaneously blocked. This means that the market is no longer just concerned about Middle East oil but is now facing a dual supply pressure of "energy + food." As oil prices rise, driving up transportation and fertilizer costs, and Black Sea grain exports are restricted, inflationary pressures on emerging markets and import-dependent countries are expected to escalate further.

This supply shock is resonating with the reinvigorated hawkish discussions within the Federal Reserve. Former New York Fed President Dudley believes that the demand expansion brought by AI investment, rising energy prices, and the still relatively loose financial environment may put greater pressure on the Fed to raise rates in the fall. However, Morgan Stanley insists on keeping rates unchanged throughout the year, arguing that the market's self-tightening financial conditions are equivalent to several rate hikes. What is truly worth watching is not which view gains the upper hand but the Fed's tolerance between "energy inflation" and "economic slowdown."

Wall Street funds have already taken a defensive stance. US money market funds managing over $8 trillion in assets have noticeably shortened their duration recently, increased holdings in overnight repurchase agreements and floating-rate notes, reflecting that large funds are willing to forgo some yield to retain higher reinvestment flexibility. This is essentially preparation for two scenarios: if oil prices continue to rise, the Fed may be forced to maintain higher rates for a longer period; if the conflict suddenly cools down, the repricing speed of short-term rates could be very rapid.

For risk assets, the greatest pressure in the current environment comes not from a single event, but from simultaneous policy and supply chain unpredictability. The Strait of Hormuz, the Bab el-Mandeb, and the Black Sea are three key nodes where any new actual disruption could quickly transmit to oil prices, grain prices, and bond yields; and with the Fed deliberately reducing forward guidance under Powell's leadership, the market finds it harder to preemptively lock in the policy path.

In the short term, the market will focus on three observation points: whether the 10-day ceasefire plan will receive substantial responses from both the U.S. and Iran, whether the Houthis will take action against Saudi-related vessels, and when the CPC terminal will resume shipments. These three signals will determine whether energy risks remain at the "expected level" or further evolve into a genuine supply gap.