Just now, the Houthi forces sent a "battle letter": the global markets are trembling.

On Friday, just after the US stock market closed, the Houthis delivered a “declaration of war” — this weekend, no one will be able to sleep.

On March 27 local time, the Houthis clearly stated that they are ready for “direct military intervention” in the Iran war.

The statement was firm and listed four triggering conditions, including “the US and Israel using the Red Sea to launch hostile actions against Iran” and “continuing to escalate military actions against Iran.” This marks an unprecedented acceleration toward a regional total war since the outbreak of the Iran war at the end of February.

The market’s reaction was precise and brutal. By Friday’s close, West Texas Intermediate (WTI) crude oil stood at $101 per barrel, while Brent crude oil surpassed $111.

The S&P 500 index closed at its lowest point in 232 days, evaporating about $1 trillion in market value that day — since the outbreak of the war, the index has cumulatively lost $4.8 trillion.

The yield on the 10-year US Treasury bond closed at 4.44%, having briefly touched 4.48% during the day, marking a new high since July of last year.

All risk assets — from tech stocks to Bitcoin — are facing a massive shock, with crypto stocks, as “high beta among high beta,” standing at the forefront of the storm.

Crypto stocks, led by MicroStrategy (MSTR) and Twenty One Capital (XXI), collectively fell over 6%, while mining stocks like Riot Platforms (RIOT) and CleanSpark (CLSK) saw declines generally between 5% and 8%.

Epicenter: Strait of Hormuz

The starting point of this adjustment undoubtedly comes from the situation in the Middle East.

Since the outbreak of the Iran war at the end of February, the Strait of Hormuz has effectively become “paralyzed.” The Iranian Revolutionary Guard controls this vital passageway, which accounts for one-fifth of global oil transportation, and the volume of tankers passing through the strait has plummeted by over 95% in the past month. Iraq’s oil exports have dropped from about 3.4 million barrels per day before the war to around 250,000 barrels per day currently.

In recent days, the market had temporarily harbored fantasies of a de-escalation. President Trump delayed the deadline for sanctions on Iranian energy facilities and indicated space for negotiations, leading to a noticeable rebound early in the week. However, by Friday, that hope was once again shattered by reality: Iran did not clearly back down, and Israel continued to signal escalation, with the conflict not genuinely moving toward resolution.

Next, once the Houthis intervene, it means that the Red Sea route will also face the same blockade risks. As controllers of the Bab-el-Mandeb Strait, the Houthis have previously demonstrated their ability to disrupt Red Sea shipping through attacks on commercial vessels. If both shipping routes are simultaneously cut off, the global energy supply chain will face an unprecedented double blow.

It is noteworthy that the Houthis explicitly listed “lifting the unjust blockade on Yemen” as one of the conditions, meaning that any attempts to resolve the Red Sea crisis through military means may be interpreted as “increasing oppression of the Yemeni people,” triggering a more intense military response.

Warnings from Macquarie strategists are becoming reality: if the war continues, oil prices could soar to $200 per barrel, surpassing the historical peak of $147 in 2008.

The most important thing here is not to remember a specific number, but to understand a change: oil prices are becoming the “master switch” for global assets.
When oil prices rise from the $70s to over $100, the impact is not limited to energy stocks but affects the entire cost structure of the economic system: will this drag the world back into a “high inflation + low growth” stagflation environment?

And this is precisely the combination that financial markets fear the most.

“Inflation Strikes Back”?

Philadelphia Fed President Anna Paulson clearly warned on March 27 that the prolonged inflation in the US above 2% over the past few years has made businesses and consumers more sensitive to price changes. Against this backdrop, the commodity shocks from the war, such as those in fuel and fertilizers, may not be viewed as “one-time disturbances” as in the past, but rather could transmit into inflation expectations more quickly and persistently. She also emphasized that the conflict in the Middle East has introduced new risks to both inflation and growth.

The day before, Federal Reserve Governor Lisa Cook also provided a similar assessment. She stated that the Iran war has tilted the risk balance in the Fed’s dual mandate more toward inflation; although the job market “still remains barely balanced,” the greater risk now is a resurgence of price pressures, and the interest rate futures market is now almost discounting any possibility of rate cuts this year.

In market language, this means: the logic that previously supported risk assets is starting to weaken.

Previously, US stocks, especially tech stocks, maintained high valuations under the important premise that while the economy was slowing, inflation was generally falling, and the Fed would eventually cut rates, with interest rates gradually moving lower. But now, oil prices and war have interrupted that premise.
If inflation rises again, the Fed will not only struggle to cut rates but may even face discussions about “whether it needs to maintain high rates for longer.” This would be a direct blow to high-valued growth stocks, crypto assets, and all trades reliant on liquidity.

Why Didn’t the Bond Market Save the Day This Time?

Many people instinctively feel that when the stock market falls sharply, US Treasuries should rise, and yields should drop.
But this time, it’s not that simple.

The yield on the 10-year US Treasury bond briefly rose to 4.48% on Friday, closing around 4.44%, indicating that although there is demand for bonds as a safe haven, it is also facing a larger force: rising inflation expectations. An escalation of war would prompt funds to seek bonds for safety, but rising oil prices would lead investors to worry about higher future prices, thus demanding higher yields to compensate for inflation risk. The result is that the traditional “stocks fall, bonds rise” dynamic has only partially failed this time.

This is precisely the most dangerous aspect of the current market:

If it were just a stock market decline, the problem would be limited to risk appetite; if the stock market falls, oil prices rise, and bonds are not strong, it means that the entire macro pricing framework is under pressure together.

Since the outbreak of the Middle East conflict, Trump has been trying to calm the market through “maximum pressure” on social media and “deadline delays.” Wall Street has playfully dubbed this pattern as “TACO” — an acronym for “Trump Always Chickens Out.”

This strategy succeeded in April 2025. At that time, Trump was forced to abandon the “liberation day” tariff threat due to severe fluctuations in the Treasury market, leading to a market rebound immediately afterward. However, this time, the situation is completely different.

The reason is that tariff threats are policy tools that Trump can unilaterally control, while war is not. The Houthis’ statement on Friday clearly indicated that they are ready for “direct military intervention” and listed “continuing to escalate military actions against Iran” as one of the triggering conditions. This means that even if Trump chooses to “back down,” other members of the resistance axis may actively escalate the conflict.

The experience of the past 14 months tells us that the 50 hours from now until the futures open on Sunday at 6 PM Eastern Time will be highly variable.

Expert Opinion: Fragile Optimism

The market is not entirely pessimistic.

The more optimistic faction believes that US corporate profits and balance sheets still have resilience. Barclays raised its S&P 500 target this week, believing that tech profit growth and US economic resilience could partially offset the impacts of war and energy shocks; Morgan Stanley’s Chief US Equity Strategist Mike Wilson also stated that this situation resembles an oil price shock, rather than a systemic recession capable of ending the current business cycle.

But the problem is that this optimism is based on a very crucial premise: oil prices must not continue to spiral out of control, and the war cannot continue to drag on.

If the Houthis truly ramp up their actions in the Red Sea, or if the Strait of Hormuz remains unrepaired for an extended period, the market will shift from “Can US stocks withstand the shock?” to “Will global imported inflation escalate comprehensively?” At that point, even the strongest profit resilience will struggle to fully offset the dual pressures of rising interest rates and weakening demand.

Morgan Stanley’s macro strategy team believes that a “Black Monday” scenario may be rehearsed this weekend. The Houthis’ statement has significantly increased the nonlinear risks of geopolitics. In this case, investment banks are advising clients to increase cash positions and even hedge gold positions — because during extreme liquidity shortages, even gold may be sold off to cover margins.

Bank of America’s Hartnett provided a relatively moderate assessment: the ultimate bottom may need to wait for the trigger of “policy panic easing” — meaning that when the risk of economic recession becomes sufficiently apparent, policymakers will be forced to take action. Until then, the market may experience more turbulence and bottoming out.

Next weekend, market sentiment will likely continue to be driven by various macro events, and at least from Friday’s trading, the outlook does not seem optimistic.