6:00 at That Moment: Crude Oil Up, Everything Else Down

Source: Wall Street Intelligence Circle

At 6:00 AM Beijing time, the panic seems to have returned:

• Oil prices opened higher and broke through the recent two-day trading range, marking the latest move.

• Meanwhile, gold, U.S. stock futures, and U.S. Treasuries declined together, while the dollar continued to rise.

The market remains a classic scenario of “dollar and crude oil rising, everything else falling.”

Despite the International Energy Agency confirming that member countries will release 400 million barrels of oil into the market, oil prices still rose—this could be a short-term market turning point.

First, after 6:00 PM Beijing time on Wednesday, news emerged that IEA member countries agreed to release 400 million barrels from reserves. However, this news only caused a short-term dip in oil prices, which then rebounded, closing higher within an hour. The fact that oil prices rose after the initial decline indicates the underlying market sentiment.

Strategic reserves can only “buy time,” not “increase supply.” For example, during the 1973 oil crisis and the 1979 Iranian Revolution oil crisis, Western countries also released reserves, but oil prices continued to rise because reserves essentially shift future oil to the present. Unless shipping through the Strait of Hormuz is secured, policy measures may have limited impact on oil prices.

Second, the “oil panic index” OVX (which measures expected oil price volatility over the next 30 days) has reached 121—indicating expectations of very intense future price swings.

60–70: Normal

80–90: Tense

100 and above: Crisis pricing

Reaching 121 suggests the market is pricing in extreme event risks. If the market believes the conflict will end soon, this index usually drops quickly. But it hasn’t, implying that the market’s true expectation is that the conflict will be difficult to resolve in the short term. Currently, nearly all assets remain closely linked to oil market dynamics.

Third, U.S. Treasuries are the most honest indicator. Although the dollar, stock market, and oil haven’t shown impressive moves and are fluctuating within recent ranges, the 10-year Treasury yield has reached 4.24%, hitting the highest level since the U.S.-Iran conflict began.

Oil prices are still trading as if in a war, but the bond market has started to price in inflation. When both lines move upward simultaneously, it often signals that larger volatility may be ahead.