The Middle East Military Conflict Fully Escalates—From “Ultimatum” to “Epic Fury 2”

On April 6, the situation in the Middle East escalated sharply. On the same day, the Russian Ministry of Foreign Affairs issued a warning stating that the illegal actions of the US and Israel are causing the situation in Iran to deteriorate rapidly and “may ultimately get out of control.”

The intensity of military strikes has risen significantly. On the 6th, the Israel Defense Forces launched large-scale airstrikes against multiple airports in Tehran, destroying dozens of Iranian Air Force aircraft and helicopters. Meanwhile, the Iranian Islamic Revolutionary Guard Corps announced the launch of the 98th-wave offensive of Operation “True Commitment-4,” attacking a US amphibious assault ship, which, after being hit, was forced to withdraw to the southern part of the Indian Ocean. Iran also fired three rounds of missiles at Israel in succession within 20 minutes; according to reports from the front line, at least 15 cluster munition warheads hit central areas of Israel.

Trump’s “Ultimatum” keeps escalating. Trump has set April 7, 20:00 (US Eastern Time) as the final deadline, claiming that if Iran does not “surrender,” the US military can “destroy all bridges and power plants in Iran within 4 hours,” and that Iran could be defeated in a single night. Previously, US forces carried out two precision strikes on the Beik overpass near Tehran, resulting in casualties numbering in the hundreds. Some officials in the Trump administration privately referred to this phase as “Epic Fury 2.”

Three major core impacts on the market:

First, passage through the Strait of Hormuz is disrupted. Iran reiterated that it must continue to blockade the strait, and about one-fifth of global oil supplies are disrupted. Iran’s top leader’s foreign affairs adviser also warned that if the US “makes the same mistake again,” it will respond by blocking the Strait of Mande.

Second, there are no signs that the military conflict will end in the short term. The Russian Ministry of Foreign Affairs warned that all parties should abandon threatening rhetoric and ultimatums, to avoid “dragging the entire region into irreversible chaos.” The market must prepare for a conflict with “no timetable.”

Third, inflationary pressures continue to build. TD Securities’ analysis indicates that if the conflict continues, rising oil prices will intensify inflation pressures, potentially limiting the Federal Reserve’s ability to ease policy, and even reigniting discussions about interest rate hikes.

From an asset allocation perspective, the logic behind traditional defensive assets is being rewritten, while cryptocurrencies are showing price resilience unlike anything in the past.

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