Markets are celebrating a Hormuz deal. History says not to.

Third time's the charm — except this isn't the third attempt.

Markets rallied this week on hopes that a new deal between the US and Iran might finally hold. Last week, President Trump said Iran had asked Washington to hold off on strikes because "the perimeters of a deal has been agreed to" — including a full reopening of the Strait of Hormuz. Oil fell hard on the news. It fell again days later, when Treasury Secretary Scott Bessent told CNBC there was 'a chance we may have a deal today or tomorrow.' Brent closed down 5.3% that session, at USD 79.36 (as of 4 August 2026).

The thinking is simple: there was a ceasefire in April, another in June, and now a third attempt. Surely the third time is the one that sticks.

It isn't the third attempt.

There have been two real agreements so far — the ceasefire around April 7-8, and the deal signed June 17 — so yes, this would make three. But if you count every moment this year that markets treated as a real breakthrough, the number climbs fast. Al Jazeera puts it at seven separate false starts before this one. One Iranian academic goes further, counting eight. Every single one has failed.

This followed the same script as the rest. Qatar's own mediators described something far narrower than a resolution. The goal, their foreign ministry spokesman said, was 'a short-term resolution that would help us reignite the talks' — not a deal on the strait itself, just a way to get both sides back in the room. Iran's foreign ministry spokesman, Esmaeil Baghaei, went further still. Even a Hormuz-specific arrangement, he said, would be 'necessary but not sufficient' to reopen the strait, since Iran would keep blocking ships as long as the separate US blockade on Iranian ports remains in place.

Even the Hormuz-specific arrangement Baghaei mentioned hasn't been settled. Iran and Oman have reportedly agreed on the geographic parameters through the Strait of Hormuz — but not on what ships pay to use it. Iran is said to be seeking 5-7% of cargo value, Oman around 3%, Washington none at all. That's one more layer of disagreement hiding under a headline that reads as resolved.

Don't let this one fool you either. This isn't attempt three, with the odds improving each time. Seven or eight attempts have already failed — which makes this one the eighth or ninth. Not one has worked yet.

A deal wouldn’t fix this quickly — and the risk just spread to a second chokepoint.

Look at what's happening at Hormuz right now. Ship traffic through the strait has collapsed to roughly a tenth of pre-war levels — six vessels crossed on Monday, against a normal pace of 100 to 130 a day. That's not a slowdown. Ships are avoiding the strait because insuring a voyage through it now costs as much as 12% of a ship's value, up from a quarter of a percent before the war. For many owners, that's expensive enough to make the trip not worth it.

The cost only drops once ships actually stop getting hit. As of Tuesday (4 August 2026), they haven't — the Liberia-flagged cargo ship Minoan Pioneer was struck by an unknown projectile in the strait's approaches, its engine room damaged, with one sailor still missing.

None of this touches the other chokepoint, Bab el-Mandeb, either. The Houthi blockade there is a dispute with Saudi Arabia, not Iran — nothing in the Iran-Oman talks binds it. The Houthis have been hitting named tankers passing through the strait, not just threatening to, and crude tanker traffic has fallen 69% since the blockade began on 22 July. Insurance near Yanbu, the main route around Hormuz, has jumped from a quarter of a percent of a ship's value to a full percent in a single day. This route was supposed to be the safe one. It isn't anymore.

That's already changing how oil actually moves from the Gulf to Asia. Take a single shipment of Saudi crude. Before the war, a tanker sailing from Yanbu to Taiwan went south through Bab el-Mandeb — the short way. With that route now under attack too, ships take the long way instead — sailing north through the Suez Canal and all the way around the southern tip of Africa before heading back toward Asia. A round trip that used to take about 38 days now takes closer to 96. 

That's not a rounding error — it's an extra two months a ship spends at sea on every voyage, and it means each ship can now make the trip only about a third as often. Fewer completed trips means less oil actually reaches buyers every month — and when supply arrives slower than usual, it tends to put upward pressure on oil prices.

Table 1: Two routes, two different risks

Even if oil prices fall, fuel prices likely won't follow — not quickly, anyway.

Two weeks ago, we flagged that US refining margins — what the industry calls the crack spread — have been unusually wide, and rising. That call held for a while: it went on to hit an all-time high of USD 69.56 on 17 July, above even its 2022 record. Since then, it has come down. As of this week, it sits at USD 57.17 — below where it stood during the 2022 energy crisis, though it's still running roughly 70% above the average level in the six months before the war began.

Chart 1: Crack spreads just broke a record

But that's not the full picture. Diesel specifically — the fuel most exposed to this war — tells a different story. Its own margin hit an all-time high of USD 90.84 a barrel on 29 July, and even after easing since, it's still running above its own 2022 record. More importantly, the price you actually pay hasn't moved with either measure. US retail diesel has climbed almost every single day for two weeks straight, from USD 5.18 to USD 5.36 a gallon. Crude fell from the low 90s to the mid-70s over the same stretch, and refiners' margins came down with it.

Economists have a name for this: 'rockets and feathers.' Prices shoot up fast when costs rise, and drift down slowly, if at all, once costs ease.

Chart 2: Refining margins fell. The pump price didn't.

Gasoline prices are climbing too — but diesel is the one actually worth watching. Tractors and harvesters run on it. So do the trucks that move food, freight, and construction materials. A rise in diesel costs moves through farming, freight, and construction before it ever reaches the price you actually pay — typically with a lag of weeks, not days. Diesel carries only a small direct weight in most countries' official inflation measures, but its indirect reach is far bigger: almost everything you buy was grown, built, or delivered with diesel-powered equipment along the way.

None of this means refineries have stopped being the bottleneck — or that the crack spread can't test its record again. Gulf refineries have been hit directly by the war. China, the world's largest refiner, is deliberately holding back output to protect its stockpiles rather than burn through them. Russia, the third-largest, is losing capacity to Ukrainian drone strikes. None of those three constraints has eased. A new spike remains possible.

People and businesses buy fuel, not crude — which is exactly why watching the crude price won't tell you where your fuel bill is headed.

And oil isn't the only thing pushing your costs higher.

Even if a deal holds. Even if ships are willing to sail again and insurers are willing to lower the price of covering them. Even if refining capacity actually catches up. Even then, that doesn't mean inflation is no longer a concern.

Food. Start with food, which is being pushed higher by causes that mostly have nothing to do with each other, or with Iran. America's cattle herd is at a 75-year low, and beef prices are roughly 12% higher than a year ago — a supply problem years in the making, independent of the conflict. Coffee is up close to 18%, per BLS data. Tomatoes are up nearly 20%, and mostly for policy reasons, not weather: the US ended a trade agreement with Mexico last year and imposed a 17% tariff on tomato imports. 

None of that needs a war to keep going — and neither does what's coming next. JPMorgan and the African Development Bank now put the odds of a severe El Niño by year-end at roughly four-in-five, with food-price pressure from it expected to peak as late as early 2027.

Where the war does touch food, the effects aren't finished either. Fertiliser costs have climbed sharply since the conflict began, and fertiliser takes months to work its way from farm to shelf. As Ricky Volpe, professor of agribusiness at California Polytechnic State University, put it, even a resolution today would still leave those effects 'filtering into the system well into late summer and the fall.'

AI. AI is also adding to your cost of living, and most people never connect the two. Moody's chief economist Mark Zandi estimates the average household is now spending just over USD 375 more a year because of it. You can see it in your electronics — Apple raised prices roughly 20% last month, citing an "extraordinary surge" in AI-driven demand for memory and storage, and Microsoft raised Xbox prices for the same reason.

None of this is the productivity payoff AI is supposed to eventually deliver. Right now, the spending is arriving well ahead of any efficiency gains. JPMorgan's own research puts it plainly: AI is inflationary in the near term, not disinflationary, because the demand hits the economy long before the payoff does.

You can see that gap most clearly in your electricity bill, and it's the clearest sign yet that this isn't going away quietly. AI data centers are being built two to three times faster than the power grid can expand to serve them, and data centers are outbidding households for the power that exists. 

Food and AI are two entirely separate cost pressures — and neither is waiting on a ceasefire.

Reduce your rate exposure, keep the Asia overweight

Put these four pressures together: shipping and insurance costs that don't reverse quickly even when things go well, fuel costing more than crude explains, food prices climbing, and AI adding costs nobody sees coming. Our view is simple. Interest rates are heading higher, not lower, and they'll likely stay higher for longer than most people expect. The bond market already agrees: long-term yields have climbed to multi-year highs even without a single rate hike since July.

Still, that's not a reason to panic or sell everything. In 2022, the Fed's most aggressive hiking cycle in four decades drove the S&P 500 down 18.1%. The two years that followed delivered back-to-back returns of 26.3% and 25.0% — one of the strongest recoveries on record. What matters more is owning the right things in this environment, and that means being ready for higher rates.

Reduce your portfolio's sensitivity to rates — starting with short-duration bonds over long-dated ones. This is also a difficult environment for anything that depends on cheap money to grow. That's why we favour technology companies with strong balance sheets and real profits over those still burning cash on future growth. Internet names fit that description: prices have pulled back this year, even as underlying earnings remain intact. The Invesco NASDAQ Internet ETF (NASDAQ PNQI) is one way to get that kind of exposure. That distinction matters: a lot of genuinely unprofitable, cash-burning growth names never fully recovered their 2021 highs even as the index roared back.

Stay overweight Asia. It remains our top pick, and nothing here changes that. We remain positive because it offers stronger growth at lower valuations than other major markets. Asian equities trade at around 13.6 times forward earnings, against 21.6 times for the S&P 500 — a meaningful discount for comparable, or in some cases better, earnings growth. Within Asia, our highest-conviction ideas are Asian semiconductors, Singapore, and China.

Last thing: keep your regular savings plan running. Nobody knows for sure what’s going to happen next. That's exactly why discipline beats trying to time the market.

Table 2: Recommended products

Declaration:

This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.

For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds a NIL position in the abovementioned securities. The analyst who produced this report holds positions in iShares Hang Seng Tech ETF and Global X Asia Semiconductor ETF.