Positive for equities, negative for oil. WTI down ~10.5% to ~$81 on news Iran stated Strait of Hormuz is open, though conflicting reports exist. $75 is key support. Physical supply shortage persists but could take months to resolve. Economic slowdown likely, adding downside pressure from SPR releases, restored production in Iraq/Kuwait, and demand destruction. High volatility in oil complex.

Shortages can turn into gluts; skepticism remains about whether the news holds.

Optimism is crude prices move down, inflation expectations follow. Negative correlation persists because this is a supply shock. Crude and equities rise together only with positive global growth dynamics and wages outpacing inflation. Negative correlation environment remains until baseline where rate cuts occur for right reasons (inflation down, not economy slowing).

U.S. exports increased, nearing net exporter status, but rig counts didn't increase; energy companies didn't add much production. Equilibrium will come later.

January pullback was orderly due to sector rotation into defensives and materials (inflation hedges). Rotation out of tech (software, semis like Nvidia/AMD) into utilities, materials, industrials. Today's rotation is good - broadening out. Watch industrials (benefit from higher energy prices & growth optimism), transports/rails, large machine builders (Deere, Caterpillar). Healthcare catching a bid, could be bottom-feeding sector (UnitedHealth).

Rotation out of defensives into higher beta doesn't take much to move markets; materials down 5% doesn't meaningfully impact S&P 500.