Holding the Defensive Book Through Iran's Walk-Off

This Week in Context

Iran suspended communications with the United States on Sunday in response to Israeli strikes in Lebanon. Brent crude futures jumped roughly 5% on the news, trading near $95 a barrel on Tuesday morning after closing May down about 19%, the worst month for oil since the early Covid period. Trump said negotiations remain ongoing and that a memorandum of understanding with Iran to reopen the Strait of Hormuz could be reached within the next week. The forward Brent curve still prices a $90-handle through year-end.

The S&P 500 closed at a fresh record on Monday as technology earnings absorbed the renewed oil shock. The tech-led rally overpowered the energy spike on the same trading day Iran was reported to be considering full closure of the Strait of Hormuz and the Bab el-Mandeb Strait. That divergence (record equity prints into a fresh geopolitical shock) is the tape's tell.

Bitcoin started May above $80,000 and closed the month below $73,000. June opened with spot near $72,500, sealing the third red monthly candle of 2026. The $76,000 cycle line we have flagged for weeks is decisively broken. The defensive book we built in April has held its shape through the drawdown.

Macro Landscape

Personal Consumption Expenditures (PCE) inflation came in at 3.8% headline and 3.3% core for April, released by the Bureau of Economic Analysis (BEA) on May 28. That keeps the rate-cut path closed and frames the macro setup heading into Kevin Warsh's first Federal Open Market Committee (FOMC) meeting on June 16-17. Real wage growth turned negative on the year per the latest Bureau of Labor Statistics (BLS) employment cost release, which caps the consumer-driven part of corporate earnings growth even as the index hits records.

The 10-year Treasury yield held near 4.46% Monday, modestly higher on the Iran headlines but well off the 4.61% year-high from mid-May. The bond market continues to take geopolitical spikes as fear trades and fade them after a few sessions. Short-dated remains preferred. Long-duration government bonds remain an avoid.

The other policy story is the Lisa Cook firing. The Supreme Court is expected to rule by end of June on whether the President can remove a Federal Reserve Governor "for cause" based on allegations of mortgage-application misstatements. Justices on both wings signaled skepticism at oral argument. Powell, now a Governor rather than Chair, warned this week that the central bank would lose credibility if any president were free to dismiss officials over policy disagreements. We do not need a view on the legal question to size positions. We need a view on what happens to long-duration assets if the answer goes the way that breaks Federal Reserve independence. Gold and short-dated cash both express that hedge.

Sector Spotlight: Energy and the Hormuz Premium

Brent traded as high as $119 through the spring conflict and bottomed near $90 in late May on ceasefire optimism. The 5% bounce this week on Iran's walk-off shows the curve is still pricing a geopolitical risk premium that any single headline can move. The constructive read is that ceasefire optimism has already drained from the front of the curve, so a deal would not produce another leg lower in oil; the cautious read is that the Strait remains physically vulnerable, and a successful closure event would be an immediate $20-plus move higher. Chevron's chief executive warned on Bloomberg TV last week that shipping disruption and kinetic risk remain very real despite the peace track. The December 2026 Brent contract continues to print at new highs, telling us the forward market is not ready to call the energy crisis over.

We considered adding USO again. The same three reasons still bar it: contango on the curve adds a roll cost, the 25% hard-money sleeve (gold, silver, Bitcoin) already carries the inflation expression, and buying $95 Brent on a counterparty's exit from negotiations is buying a spike, not a position. Re-evaluate on a pullback to $85-90 Brent or a clear Strait-of-Hormuz escalation.

Crypto Corner

Bitcoin's chart broke. Spot opened the week around $74,000, traded down to $71,800 intraday Thursday, and crossed into June at $72,500. The $76,000 cycle-line break is now four weeks old. Spot Bitcoin exchange-traded funds (ETFs) logged about $2.4 billion in net outflows for May per Crypto Times' month review, the largest monthly exodus of 2026.

The panel split has widened, not narrowed. The constructive read still leans on the long-term multipolar reserve framework: persistent fiscal dominance, central-bank credibility under stress, real wages negative on the year. None of those facts changed this month. The cautious read points to Bitcoin dominance rolling over into broader risk-off, spot ETF outflows accelerating, and momentum that did not confirm the April rally. Both reads are right at different time horizons. Our position is to hold the 7% allocation, not add at the cycle-line break, and watch for stabilization in spot volumes plus a clean bid back through $76,000 before scaling in.

Looking Ahead

Three things on the calendar.

First, the Lisa Cook ruling at the Supreme Court, expected by end of June. A decision allowing for-cause removal on these facts widens the political surface area of Federal Reserve policy, which would steepen the yield curve and lift gold; a decision against widens the dissent space inside the committee itself and tests Chair Warsh's "messier meetings" framing.

Second, FOMC June 16-17. The bigger question than cut-or-hold is what dissent looks like inside the new Chair's first meeting after a three-year run of above-target inflation prints.

Third, Iran headlines on Brent. A reopened-Strait memorandum pulls Brent below $85 in a session; a serious Strait closure event takes it past $115. The forward curve says the market expects neither.

The defensive book is intact: 27% VOO, 8% VWO, 13% GLD, 5% SLV, 7% BTC, 40% BIL. We are holding. ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������