• US Treasury yields rose significantly, led by 3-year and 5-year notes, increasing 8 bp (2.08%) and 8 bp (2.03%), respectively, on rising inflation expectations. • Brent crude oil declined sharply by 2.56% (2.36σ), while WTI crude jumped 2.79%, suggesting market volatility amid geopolitical tensions affecting oil supply routes. • The VIX fell 6.01%, reflecting reduced volatility and a more risk-on environment as major equity indices closed higher, with the Russell 2000 gaining 1.23%. --- **Recommendations** • Consider shorting Brent crude futures as price weakness signals sustained demand concerns amidst geopolitical developments. • Look to position in Treasury futures on the rise in yields, reflecting expectations of aggressive policy tightening from the Fed. • Focus on equities in the energy sector, particularly WTI crude-related stocks, as continued supply disruptions could support further rallies in the short term. --- Equities rallied amid lower volatility and rising Treasury yields, signaling a risk-on tone in the markets. Major indices performed well today, with the Russell 2000 up 1.23% and the Nasdaq Composite adding 0.77%. Key narratives included an increase in confidence due to news of potential progress between the US and Iran regarding oil supplies, although both Brent and WTI crude displayed divergent price movements. Brent crude fell sharply by 2.56% in an unusual move (-2.36σ) amid concerns over renewed tensions in the Strait of Hormuz, while WTI crude gained 2.79%. This divergence may reflect traders adjusting positions in anticipation of ongoing geopolitical impacts without a clear resolution to the conflict. Today's economic calendar was relatively quiet, focusing on core consumer prices in the UK which held steady at 3.0%. Despite being static, the lack of downside surprises aligned with the Fed's policy tightening expectations, suggesting that inflation remains a primary concern driving monetary policy. Furthermore, the Fed Futures market signifies a high likelihood of holding rates at 3.50-3.75% through the upcoming meetings, underscoring a cautious outlook on growth tied to inflation persistence. US Treasury yields across the curve increased, with the 3-year and 5-year yields rising 8 bp to 3.93% and 4.03%, respectively. This activity reflects a shift in inflation expectations, as evidenced by a rise in 5-year breakeven inflation rates (+2.0 bp to 2.55%). The compression in credit spreads (i.e., a 1.14% drop in the IG OAS) reflects a moderate risk appetite, but the increase in yields suggests a tightening liquidity regime, aligning with the current macro framework of late-cycle tightening. The liquidity regime signal indicates deteriorating conditions, with 20-day momentum declining (-0.743), reinforcing the outlook of ongoing policy tightening tempered by underlying growth concerns. The energy sector outperformed (+2.29%) buoyed by higher WTI prices, which plumped gains in related stocks, while equities like Amazon (+2.16%) and Nvidia (+1.99%) also contributed to the bullish sentiment. The materials sector followed suit with a notable gain of 2.34%, buoyed by rising prices for commodities. However, the real estate sector lagged, contracting by 0.91%, indicative of challenges as higher yield expectations deter investment flows into interest-sensitive sectors. In the commodities space, orange juice exhibited one of the largest increases of 6.28% today, reflecting specific supply concerns, while overall, prices appear regimented amid aggressive weather projections affecting agriculture. In contrast, US gasoline prices dropped sharply (-3.71%), potentially signaling weaker demand forecasts. Given the shifting dynamics in oil prices, particularly the unusual negative move in Brent crude, investors should monitor developments closely, as geopolitical tensions around the Iran conflict and supply chain disruptions continue to influence commodity prices. With the current macro regime emphasizing tightening policies, focusing on sectors that may benefit from continued inflatory pressures or resilient growth, such as energy and materials, remains prudent. As we look to upcoming calendar events, initial claims and other labor market indicators will be particularly significant as they could provide further insights into the Fed's decision-making landscape. With volatility likely remaining a factor ahead of these releases, we remain cautiously optimistic but alert to shifts in market sentiment.