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By: Arlan Suderman, Chief Commodities Economist
July 24 – Stock futures edged higher overnight, as traders focus on earnings reports, despite escalating tensions in the Middle East, Black Sea and in global trade. The VIX is trading near 19 this morning, while the dollar index trades near 101.5. Yields on 10-year Treasuries are trading near 4.69%, while yields on 2-year Treasuries are trading near 4.34%. WTI crude oil pulled back to trade near $90 per barrel, while Brent trades near $98 per barrel, as traders take profits despite further escalation of the war ahead of the weekend. Grain and oilseed prices put in new highs for the move overnight, before breaking lower early this morning on signs of possible negotiations to reopen exports in the Black Sea Region.
The Trump Administration imposed a new tariff plan today as the previous tariff plan expired. This goes back to April 2, 2025, when President Trump initiated his 10% reciprocal tariffs on much of the world using the Emergency Powers Act. The Supreme Court ruled in February that the Emergency Powers Act does not give the president the ability to collect revenue, so President Trump then switched the legal channel for the tariffs to Section 122 authority. That authority only goes for six months, which expired at midnight last night. Today’s announced tariffs fall under Section 301 of the Trade Act of 1974, with the justification that they are based on a country’s use of forced labor to produce products. Today’s tariffs were imposed on a rate of 10 – 12.5% on 60 trading partners, covering roughly 99% of all product imports into the United States. China was assessed at the 12.5% rate, bringing the total tariff on it to an effective rate of 22.2%. The stock market didn’t react negatively because a) the move was somewhat anticipated, and b) it really doesn’t change things that much from what was already in place. Some countries are disputing the rationale for the duties, but others indicate that it actually represents a slightly lower tariff than what was previously in place. Unlike the Section 122 tariffs, Section 301 merely require periodic reviews by the Administration. Many exemptions were granted in today’s tariff announcement for vital goods, including oil and gas, fertilizer, and certain foodstuffs as President Trump seeks to limit the inflationary impacts of the tariff ahead of the midterm elections. Goods covered by the USMCA trade agreement are also exempt, as are humanitarian donations.
Just one crude oil tanker passed through the Strait of Hormuz on Thursday, according to Reuters, as tensions in the region continue to escalate. That was a supertanker carrying an estimated 2 million barrels of Iraqi oil on its way to China. The United States continues to strike targets in Iran on a nightly basis, as it has done over the past two weeks. President Trump posted on social media on Thursday evening that all damages done to ships, cargo, or anything related thereto, “will be paid for by Iranian Money that the United States has in its possession, and controls.” In other words, the United States will start using frozen Iranian assets to pay for ships and cargo damaged by Iranian drones and missiles in the region. Meanwhile, there were 32 reported commodity tanker crossings through the Bab el-Mandeb Strait on Thursday, up from 26 the previous day. The total included 14 tankers entering the Red Sea and 18 exiting the Red Sea. Nine of the 18 exiting the Red Sea contained crude oil, including two headed toward China. Still, some ships are choosing to avoid the risk of getting attacked by Iran-backed Houthi rebels, choosing to go all the way around Africa instead. The average trip for a cargo ship traveling from Rotterdam to Dalian through the Red Sea is 48 days, whereas it takes roughly 57 days if it goes around Africa instead. However, a tanker loading on the west Coast of Saudi Arabia headed to Asia triples the length of the trip going around Africa, adding to cost and reducing the number of round trips that it can make.
Grain and oilseed prices hit new highs overnight on escalating Black Sea risks. However, they broke into negative territory early this morning when news broke that Ukraine is proposing a compromise solution for allowing grain to continue to move through the Black Sea. The proposal reportedly provides an avenue for flag-state or shipowner notification of both Ukraine and Russia before calling at a port in either Russia or Ukraine, with each committing not to hit that ship. Only a limited group of countries would be favored by the plan, including China, India, several Arab countries and potentially a few others. This plan is reportedly being discussed by the foreign ministries of both Russia and Ukraine. Another option would be that temporary ceasefire windows of two to three days would be issued for ships to enter ports, load and leave, but that option is less practical. I remain skeptical of either of these plans working for long when the objective in hitting the ships in the first place was to reduce revenue flow for the other country, but this morning’s market reaction was largely due to the fact that this is the first indication that the momentum of escalating hostilities had changed, with both countries recognizing the cost implications of their recent escalation. The question is, can either country be trusted to keep such an agreement for long. Ceasefire agreements have repeatedly failed between these two countries, just as they also have in the Persian Gulf. Neither war is anywhere close to resolution, with commodity logistics remaining at the center of both.
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July 24 – Stock futures edged higher overnight, as traders focus on earnings reports, despite escalating tensions in the Middle East, Black Sea and in global trade. The VIX is trading near 19 this morning, while the dollar index trades near 101.5. Yields on 10-year Treasuries are trading near 4.69%, while yields on 2-year Treasuries are trading near 4.34%. WTI crude oil pulled back to trade near $90 per barrel, while Brent trades near $98 per barrel, as traders take profits despite further escalation of the war ahead of the weekend. Grain and oilseed prices put in new highs for the move overnight, before breaking lower early this morning on signs of possible negotiations to reopen exports in the Black Sea Region.
July 23 – Renewed AI concerns and rising oil prices combined with higher interest rates to weigh on stock futures overnight as many of the food and energy-based commodities saw sustained buying interest. The VIX firmed to trade near 19 this morning, while the dollar index followed Treasury yields higher, trading near 101.4. Yields on 10-year Treasuries traded near 4.70%, representing a fresh 18-month high, while yields on 2-year Treasuries traded near 4.35%, reflecting fresh 17-month highs. WTI crude oil traded near $91 per barrel, while Brent traded near $100 per barrel. The grain and oilseed markets were mostly higher, with the exception of minor losses in the hard wheat markets.
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