By Benjamin Picton, Senior Market Strategist at Rabobank

Erwin Schrodinger famously proposed a thought experiment to illustrate the apparent absurdity of quantum mechanics when applied to the macroscopic world. In the theoretical experiment, Schrodinger’s eponymous cat, contained in a box with a radioactive atom, a Geiger counter and a vial of poison, exists in a state of superposition whereby it is simultaneously both alive and dead until the box is opened.

And so it is with the Strait of Hormuz,which exists in a state of both openness and closedness until a ship actually attempts the transit.

On Friday Iranian Foreign Minister Araghchi posted on X that the Strait was “completely open” to all commercial vessels for the duration of the 10-day ceasefire between Israel and Lebanon. Markets reacted swiftly, the S&P500 rose 1.20% to close at a new all-time high and the Brent crude front future fell more than 9% to settle at $90.38/bbl – its lowest weekly close since the war began.Even dated Brent (the physical oil price for immediate delivery) fell by more than 15% to $98.95/bbl– its lowest level since March 11th, which was the immediate aftermath of Trump’s comment that the war in Iran is “very complete”.

The all important dated brent is plungingpic.twitter.com/rPRiOMp0BV

However, the joy of financial markets has now turned to ash in our mouthsas the Iranian Revolutionary Guard Corps moved to re-establish (or re-assert?) the closure of the Strait.Several vessels were turned back over the course of the weekend and two were fired upon by the IRGC, prompting the Indian government to summon the Iranian ambassador to protest. Al Jazeera reports that more than a dozen ships attempted to transit the Strait in the brief time that it was open – including 8 successful transits of oil and gas tankers – but shipping had ground to a standstill again by Sunday.

And rejected: the two tankers taking the neutral route, Minerva Evropi and Nissos Keros, have turned around; the Sanmar Herald which appears to be taking the Iran-sanctioned Larak island route is proceeding.https://t.co/aceBI7ki0Bpic.twitter.com/gmkM37iA1U

Also on Sunday,the US Navy seized the MV Touska, an Iranian-flagged cargo ship that had been attempting to break the blockade en-route from Gaolan in China to the Iranian port of Banda Abbas. After a 6-hour radio standoff, the USS Spruance fired its main gun to disable the Touska’s propulsion systems before the vessel was boarded by US marines, marking the first known use of force in enforcing the blockade. The Washington Post reports that Gaolan is a known port of origin for sodium perchlorate, the primary oxidizer in solid rocket fuel for Iranian ballistic missiles.

U.S. Marines depart amphibious assault ship USS Tripoli (LHA 7) by helicopter and transit over the Arabian Sea to board and seize M/V Touska. The Marines rappelled onto the Iranian-flagged vessel, April 19, after guided-missile destroyer USS Spruance (DDG 111) disabled Touska’s…pic.twitter.com/mFxI5RzYCS

Thus,the seizure of the Touska marks a potential point of escalation for both sides. The IRGC has nominated lifting the US blockade as a red line for opening the Strait, which they say would need to be done under Iranian auspices, and the US has threatened secondary sanctions against any country that provides Iran with weapons.

Source: ZeroHedge News