Editor:Wu Shuo Blockchain

This issue of Wu Shuo Space focuses on "what is the market trading after the escalation of the US-Iran conflict". Participating guests include secondary researcher Minta, cutting-edge technology investor didier and macro hedge fund PM Griffin Ardern. The discussion believes that the current market is shifting from "short-term geopolitical shocks" to "long-term conflict pricing": changes in crude oil, shipping insurance, terminal commodity prices and some central bank policies indicate that the impact of the war has begun to penetrate into the global supply chain and inflation expectations. The two guests judged based on this that what deserves more attention in the future is not a single risk aversion, but the re-pricing of resources, transportation capacity and payment/trading channels.

Market pricing and crypto asset opportunities under the escalating conflict between the United States and Iran

Minta: After the US-Iran conflict entered the second half, although the market rebounded for a time, judging from the situation, the conflict has not cooled down, but there is still a risk of escalation. The United States continues to attack Iranian targets, while Iran counterattacks with missiles and drones. The Israeli air defense system is also under pressure, indicating that the impact of this conflict on the global pattern and risk assets is deepening. What I want everyone to discuss is: What is currently being traded in the market? Is this conflict just a short-term disturbance, or is it already starting to be priced in as a long-term risk?

Griffin Ardern: I think the market is switching from "short-term event trading" to "long-term conflict pricing". Taking crude oil as an example, the current price trend is not only driven by the war itself, but the result of government intervention, real demand and market games. Especially under inflation and political pressure, state power is getting more deeply involved in pricing. This is obviously different from the market environment that was mainly dominated by traders, speculators and the upstream and downstream of the industrial chain in the past.

This long-term characteristic is also reflected in shipping, insurance and terminal prices. Shipping costs and insurance premiums have continued to rise recently, and commodities related to oil and trade routes have generally increased in price, indicating that the market has begun to regard conflicts as ongoing risks rather than short-term events. Actions at the central bank level also reflect this, with inflation expectations rising again.

The performance of the crypto market is more complex. Options and futures data illustrate that institutions’ medium-term expectations for BTC and ETH are still cautious, but prices are rising, which is more likely to be the result of liquidity redistribution. As traditional gold circulation and capital transfers are hindered by the situation in the Middle East, crypto-assets have become one of the few channels that can still flow across borders and are not easily controlled. This has re-strengthened the "fund channel" properties of BTC and ETH.

A very clear signal is that in the past, BTC usually had a higher forward premium compared to ETH, but in the current environment, the gap in implied yields between the two has almost been eliminated. This shows that the market is not focusing more on the long-term narrative at this moment, but on short-term liquidity needs. In the medium term, this liquidity drive may still support the performance of crypto assets, but once the withdrawal of funds from the Middle East is completed, the market is not so optimistic about the subsequent trend of crypto assets. This is the core pricing logic of the current encryption market.

The limit of oil price suppression and the risk of stagflation in the United States

Minta: You just mentioned that both the Trump administration and Bessent are sending signals to the market to "press down oil prices and control inflation." But when the United States is already showing signs of primary stagflation and if the Strait of Hormuz continues to be blocked, how far can this policy suppress oil prices?

Griffin Ardern: I think that at best they can only delay the rise in oil prices, but it is difficult to really suppress it. All the United States can do is to release strategic oil reserves and increase domestic energy substitution, but both of these paths have obvious limitations. Strategic reserves are limited, and alternative sources such as shale oil and heavy oil are more costly, which will ultimately be passed on to oil prices and inflation.

More importantly, the market does not believe that the United States can resume navigation in the Strait of Hormuz in a short time. If the channel cannot be opened for a long time and strategic reserves are gradually depleted, oil prices will most likely rise further when the market realizes that "the cards are about to be played out", and even a trend similar to a short squeeze will occur. In other words, what Trump can do is more like stalling for time than reversing the trend.

The real pressure behind this is not just crude oil itself, but also the overall increase in shipping, insurance and supply chain costs. These additional costs will be transmitted layer by layer along the production, trade, and consumption chains, forming "pulse inflation" and continuing to push overall prices upward.

The deeper problem is that the geopolitical situation may be changing the pattern of energy trade and currency settlement. Once the Gulf countries begin to re-select security and trading channels, the U.S. dollar's advantage in international trade may be further weakened. As a result, the United States not only has to face rising energy prices, but also faces the dual pressures of imported inflation and a weakening dollar.

So for the United States, there are currently few truly easy options: raising interest rates will hurt the economy and financial system, and not raising interest rates may amplify inflation. Because of this, this round of oil price and inflation risks may be deeper and longer-lasting than the market currently expects.

Divided pricing of risk markets and periodic benefits of Bitcoin

Minta: In the context of the current US-Iran war, how is the risk market traded and priced?

didier: My overall feeling is that the U.S. stock market is still optimistic at the moment. The pricing is more like betting that the conflict will end quickly, and at least the problem in the Strait of Hormuz can be alleviated as soon as possible. But this is not entirely consistent with prediction markets. If the conflict really drags on for several months, there is actually a clear risk of a correction in U.S. stocks, so I think it is necessary to allocate some put options while the market is still optimistic.

On the other hand, the encryption market has benefited this time. The Iran war fixed Bitcoin’s narrative in the short term. Some previous security incidents once dampened market confidence, but the war made more people realize that Bitcoin has greater portability and transfer capabilities than gold in extreme environments, which has promoted the market's re-pricing of its "escape asset" properties.

In addition, there is another important reason that has been overlooked for Bitcoin's recent strength, which is the massive buying of micro strategies. In the past two weeks, it has bought about 40,000 Bitcoins, and its financing structure has changed: it no longer relies mainly on selling shares, but more on buying coins through the issuance of high-interest perpetual bonds, and the pressure of equity dilution has been significantly reduced. This shows that the financing path it envisioned a year ago is now starting to really come true.

Coupled with the continued net inflows of ETFs and the continued accumulation of funds by large players on the chain, Bitcoin's rise is not just driven by geopolitical conflicts, but the result of narrative restoration, institutional buying and capital inflows.

So my overall judgment is: the traditional risk market, especially the US stock market, is actually a little too optimistic at the moment; while the encryption market has unexpectedly benefited from this round of conflict and its performance is actually stronger.

Griffin Ardern: The current optimism in US stocks has indeed brought some liquidity to the crypto market, but this is more of a short-term fund rather than a long-term allocation of funds. This round of crypto rally has benefited from the "escape asset" narrative on the one hand, and on the other hand it has taken on some of the overflow liquidity from US stocks. However, investors' long-term expectations have not actually improved, so there are short-term opportunities, but long-term risks remain.

In addition, the current rising market demand for perpetual bonds essentially reflects investors' deepening concerns about U.S. inflation and sovereign debt risks. Whether it is short-term U.S. debt or long-term U.S. debt, yields are rising, indicating that the market's risk requirements for U.S. dollar assets are increasing. Against this background, funds began to flow more into corporate bonds with high yields and strong fundamentals.

When Bitcoin is given a certain "escape asset" attribute again, investors are more willing to hold bonds related to Bitcoin that can provide income at the same time, rather than simply holding U.S. Treasury bonds. This shows that the market is gradually shifting from traditional treasury bond credit to a credit system that is more biased toward commodity mortgages and real asset support. Under this framework, Bitcoin has also begun to be regarded as a special collateral.

This is why on the one hand, high-quality corporate bonds are popular, and on the other hand, perpetual bonds based on Bitcoin logic like MSTR are also becoming more and more popular. What the market really wants is assets that can distance themselves from the risk of the U.S. dollar and provide stable returns.

Medium and long-term allocation direction: gold, silver, copper, BTC revaluation, AI chain and oil transportation create new opportunities

Minta: Following this logic, in addition to the directions just mentioned, what other assets do you think are suitable for allocation from a medium- to long-term perspective? I myself would think of a gold mine. If oil prices and geopolitical tensions remain uncertain, funds may continue to flow to hard assets, and gold mines are more resilient than gold itself. In addition, what other assets are worthy of mid- to long-term attention?

didier: I am still bullish on Bitcoin. Although some previous events have impacted market confidence in the short term, it will eventually return to its original logic. Looking at the next few years, I think both Bitcoin and gold still have the potential to reach new highs. Silver is more elastic, but its speculative properties are also stronger. The subsequent trend still depends on whether gold can continue to rise sharply.

If the situation worsens further, such as the Strait of Hormuz being unable to resume navigation for a long time, Bitcoin will not rule out another dip, giving the market new opportunities to buy low. But in the medium to long term, I think it's not far from the bottom.

In addition, I am also very concerned about the AI industry chain. After the growth of core targets such as NVIDIA began to passivate, the market has spread to storage, optical communications, electricity, etc., and even spilled over to Japanese and Korean companies. Against this background, Circle has gradually been included in the end of the AI ​​industry chain, especially the narrative of agent payment, making it relatively resilient at the current stage.

Looking further, with the development of agent payment and agent transactions, the demand for blockchain and cryptocurrency will be strengthened. Because payments, transfers and transactions between machines in the future are likely to be more suitable to be completed based on stablecoins and on-chain systems. Therefore, I think the stablecoin track is a very certain mid- to long-term direction, and Circle, as one of the few tradable targets, deserves special attention.

In addition, oil transportation is also a direction worth adding. It benefits from the obstruction of the Strait of Hormuz in the short term, but the medium- and long-term logic is that if some sanctioned countries return to the formal shipping system in the future, regular market freight rates may also be supported. Therefore, transportation capacity assets are actually a line worth paying attention to.

Minta: The current US stock trading AI CAPEX mainly focuses on storage, optical modules, CPU and other directions. What do you think is the current stage of trends like silicon photonics? In addition, will the US-Iran war affect the timing of the hype for these tracks?

didier: I think the more certain direction currently is storage and power.

Let’s talk about electricity first. There are now several main paths, including miners turning to AIDC, nuclear power, and photovoltaics and energy storage. Among them, uranium corresponding to nuclear power deserves attention, especially if the relationship between Russia and the United States cannot be eased in the future, the Western system may face a shortage of uranium supply, which will bring new opportunities. Overall, the power problem actually reflects the structural opportunities brought about by the parallel supply chain systems.

In terms of storage, I think it is still one of the hardest directions in the AI industry chain. This bottleneck will be difficult to solve quickly in the next two to three years. Although targets such as Micron and SanDisk have been fully competitive, funds have also begun to transfer to Japanese and Korean storage companies with relatively lower valuations, such as Samsung, Hynix, and Kioxia. Overall, storage is still one of the strongest tracks this year.

In comparison, the logic of optical modules and silicon light is more complicated. On the one hand, the market has been debating whether to scale up or scale out; on the other hand, the disagreement between "light or copper" on the technical route has always existed. So optical communications is still a big topic, but not as deterministic as storage.

If you want to find the real expected difference in the AI industry chain, I think agent payment and agent transactions are more worth looking at. Circle is already the first relatively clear target, but the market’s understanding of this line is far from being fully developed, and many people have not actually gotten on board yet. As for agent trading, although there are not many clear targets, platforms such as Futu and Robinhood will most likely go in this direction in the future.

So my opinion is: storage and electricity are the relatively certain main lines at present; while agent payment and agent transactions are directions where the expected difference is greater and there are not many participants.

Griffin Ardern: I would like to add a lower-level direction, which is copper.

Because whether it is AI, power construction, or storage and chips, they are essentially inseparable from copper. The current supply and transportation of copper are also being impacted by the restructuring of the supply chain. The supply side mainly focuses on Chile and Africa. On the transportation side, the cost has increased significantly due to the obstruction of the Red Sea and the detour around the Cape of Good Hope.

At the same time, the demand side is increasing simultaneously: power construction brought about by AI requires copper, storage and electronic industries require copper, and the US strategic resource reserves are also increasing demand for copper. In other words, copper is now facing multiple challenges such as limited supply, more expensive transportation, and rising demand.

So I think the market’s mid- to long-term demand for copper is actually underestimated. Whether it is allocating to resource-based markets such as Chile, or directly focusing on copper mining companies and related stocks, they are all directions worth considering.

More broadly speaking, as long as the key waterways in the Middle East continue to be blocked, the logic of regionalization of supply chains and rising transportation costs will continue to strengthen, then energy, metals, precious metals and other resource assets may usher in a round of repricing as a whole.

From a US dollar pricing perspective, copper is a relatively low-lying direction that deserves special attention at the moment.

Direct beneficiaries from the US-Iran conflict: military industry, shipping and resource channels

Minta: If you look at the directions that benefit more directly from the conflict, such as oil transportation, drones, military industry, local resource chains, and even commercial aerospace, which tracks do you think are more worthy of attention?

didier: I think commercial aerospace must be a big track, and even an opportunity for dimensionality enhancement similar to AI. As core companies such as SpaceX advance capitalization, the entire sector is likely to enter a stage of continued expansion in the future, and it will also become an important scene for the implementation of many new technologies.

UAVs are also an important direction that has been verified again in this round of war. It has become a core component of the modern offensive and defensive system, and the real evolution direction in the future is likely to be AI-driven drone swarm collaboration. Therefore, in the long term, drones and AI are deeply bound.

In addition, this war has once again demonstrated that the importance of AI intelligence analysis and satellite monitoring is rising rapidly, so the integration between military industry, AI, and space infrastructure will become closer and closer.

As for strategic metals and minor metals, I also think they will become more and more important. Because whether it is optical modules, aerospace engines, or high-end manufacturing, many key materials are subject to supply concentration, quota restrictions, and geopolitical risks. Once supply is constrained, price increases and supply chain restructuring will occur simultaneously.

So overall, the directions that benefit more directly from the conflict are mainly commercial aerospace, drones, and key strategic metals. There is a strong long-term logic behind these tracks.

Griffin Ardern: In addition to resources and energy, I think shipping is also a very important direction.

This conflict has made the market realize again that money is not enough during wartime. The key lies in the safe circulation of resources. Therefore, whoever can ensure the safety of resource transactions and transportation will be more valuable. The recent reflow of funds to traditional commodity nodes such as Geneva, Singapore, and Hong Kong also shows that the market is repricing supply chain security.

In this context, the importance of shipping companies has increased significantly. In particular, large shipping companies that can stably operate alternative routes around the Cape of Good Hope deserve special attention. Because what will be truly scarce in the future is not just the resources themselves, but also the ability to safely transport them.

In addition, as the mortgage and payment attributes of commodities increase, the asset values of mining companies that truly control spot resources will also be revalued. If these mining companies can be more closely integrated with the shipping system and establish more independent and safer trade channels, then such companies are also worthy of attention.

Position rhythm and defensive ideas under high market divergence

Minta: If we combine the previous analysis and return to trading nodes and timing, how will you handle different positions now, such as Beta and Alpha positions?

didier: I think we should be more defensive now because the market sentiment is generally optimistic. At this time, we need to retain protective positions.

But core positions do not need to be moved easily, such as storage, electricity, and BTC. I think we should continue to hold them. Because after this round of adjustments, the market is not too far from the bottom. On the contrary, those directions that have fallen more in the past and have room for recovery in the future are worthy of gradually entering; and those directions that have risen a lot, you can consider making some adjustments appropriately.

As for long-term optimistic Alpha opportunities, I will not be too obsessed with short-term timing. The core is still to hold on. However, in the current environment where fluctuations may be large, offensive positions must be more flexible. They can appropriately switch to low positions and directions with larger expected differences, and use put options for portfolio protection.

Griffin Ardern: I would suggest some low-cost puts that can be configured now. Because you don’t know when the big drop will come, but there is a high probability that it will happen at some point in the future, so you can use carry strategies to spread the cost and build some protective positions in advance.

The core reason is that the current market rise is more supported by short-term liquidity and is not stable in the medium and long term. As geopolitical conflicts, inflationary pressures and policy changes in various countries are gradually transmitted, market expectations for future interest rates are actually rising. High interest rates are likely to become the norm in the next few years, which in itself may become a key variable that puts pressure on risky assets.

In addition, from the perspective of capital allocation, it is not recommended to only hold US dollars. The current strength of the U.S. dollar is more driven by risk aversion, but if the subsequent market begins to reprice the purchasing power of the U.S. dollar, especially at the resource and trade levels, the U.S. dollar may not be able to maintain its current strength.

So I will consider making some currency diversification allocations, such as appropriately adding the euro and the currencies of resource countries such as the Australian dollar. Because resource countries themselves benefit from rising commodity prices, and countries like Australia have resource attributes and relatively stable policies, their related currencies and assets may perform better.

On the whole, now we not only need to defend positions, but also need to diversify at the cash and currency level.