$74K Bitcoin. 9% Kospi Surge. Oil at Multi-Month Highs. This Rally Has a Problem

South Korea’s Kospi just posted its best day since 2008. Bitcoin topped $74,000. Oil keeps climbing anyway. Here’s what’s actually happening across every major market — and why the relief may be premature.

Global markets staged a broad recovery on Wednesday and into Thursday, driven by tentative optimism that oil flows through the Strait of Hormuz may resume under US naval protection. But the rally is built on headlines, not resolution — and the headlines keep changing by the hour.

Asia: Kospi’s whiplash recovery

South Korea’s Kospi surged as much as 12% on Thursday before settling to close up 9.3% — its best daily performance since 2008. The rebound follows Wednesday’s record single-day loss, which was driven by overleveraged long positions being liquidated on margin calls. The forced selling appears to have flushed out the weakest hands, giving remaining investors confidence to re-enter.

But context matters. The Kospi is still up 117% over the past twelve months. What looked like a crash on Wednesday was, in index terms, a correction within a spectacular run rather than a structural breakdown.

Elsewhere in Asia, Japan’s Nikkei rose 1.9%, Hong Kong’s Hang Seng edged up 0.4%, Shanghai added 0.6%, Australia’s ASX 200 gained 0.4% and India’s Nifty 50 was up 0.6% heading into the close. The regional rebound reflects cautious relief that crude prices have stabilised, though investors remain acutely sensitive to every new headline from the Gulf.

Europe: bouncing but uncertain

European indices recovered from Tuesday’s lows but opened mixed on Thursday with a modest upside bias. Even Spain’s IBEX 35 has rebounded, despite President Trump’s threat to cut off trade with Spain after Madrid refused to allow US forces to use military bases for strikes on Iran.

The energy price shock that hammered European markets earlier this week has eased slightly, but gas prices remain elevated with Qatar’s LNG export plant still offline and the Gulf supply route disrupted. UK energy providers continue to pull cheaper fixed-price deals, and the inflation implications have not gone away.

US: decent gains, mixed signals

Wall Street posted solid gains on Wednesday. The Dow rose 0.5%, the S&P 500 added 0.8%, and the Nasdaq and Russell 2000 climbed 1.3% and 1.1% respectively. Futures were flat overnight heading into Thursday.

The rally was supported by several factors. The US Senate backed the Trump administration’s military action against Iran. Defence Secretary Pete Hegseth declared the US is winning decisively and that additional forces are arriving in the region. A US military official said this morning that Iran had failed to close the Strait of Hormuz — the single most important headline for energy markets this week.

Economic data also helped. Wednesday’s ADP payroll numbers were positive ahead of Friday’s Non-Farm Payrolls, and the ISM Services PMI came in significantly above expectations, building on Monday’s decent manufacturing data. The combination gave investors enough confidence to buy the dip, though the S&P 500 remains below its all-time high near 7,000.

On rates, the picture has shifted. Market expectations now favour a 25-basis-point cut in September rather than June, and the probability of two cuts this year has dropped. Several Fed governors made hawkish comments before the conflict began, and rising energy prices are making further easing harder to justify.

Treasury Secretary Scott Bessent confirmed that a 15% global tariff should take effect this week — another headwind that markets have not yet fully priced in.

Oil: rallying despite reassurances

Crude oil pushed higher overnight, with WTI briefly topping Tuesday’s multi-month high. Trump’s promise of affordable insurance for tankers and naval escorts through the Strait has so far failed to cap prices. A modest dip followed the US claim that Iran had not closed the strait, but sentiment was immediately hit by fresh escalation: Iran launched a missile attack on Israel on Thursday morning, and a US submarine torpedoed an Iranian frigate off Sri Lanka on Wednesday — a significant escalation in naval hostilities.

Iran has promised to retaliate, and unsubstantiated reports emerged on Thursday that an Iranian strike had hit a US oil tanker. The oil market remains entirely headline-driven, and the price gap that opened between Friday’s close and Monday’s open shows no sign of being filled.

Gold, silver and crypto

Gold firmed on Thursday but pulled back from Asian session highs. Investors appear conflicted about whether gold can sustain its safe-haven role or whether January’s high represents a near-term peak. The backdrop of ongoing strikes, Iranian retaliation and a US submarine sinking an Iranian warship is keeping uncertainty elevated.

Silver has recovered some ground after briefly dropping below $5,000 per ounce earlier in the week, building support around $80 but remaining well below its all-time high above $121 from late January.

Bitcoin rallied over 6% on Wednesday, briefly topping $74,000 to hit a four-week high. Strong flows into US Bitcoin ETFs this month suggest renewed institutional interest, though the cryptocurrency faces resistance at levels that capped prices between March and June 2024. Holding above $70,000 on any pullback would be a significant technical signal.

What to watch

Friday’s Non-Farm Payrolls will test whether the labour market data can sustain the relief rally. But the real driver remains the Gulf. If the Strait of Hormuz genuinely reopens to commercial traffic under US escort, oil prices could retreat and the entire risk picture changes. If it does not — or if escalation continues — this week’s recovery will look like a dead cat bounce.

FAQ

Has Iran closed the Strait of Hormuz? A US military official said on Thursday that Iran had failed to close the Strait of Hormuz, the chokepoint through which roughly 20% of global oil supply passes. However, commercial tanker traffic remains severely disrupted, oil prices continue to trade near multi-month highs, and naval hostilities are escalating — including a US submarine sinking an Iranian frigate. The US has promised naval escorts and insurance guarantees for tankers, but no clear timeline for resumption of normal shipping has been given.

Are interest rate cuts still expected in 2026? Market expectations have shifted significantly. The CME FedWatch Tool now indicates that traders favour a 25-basis-point cut from the Federal Reserve in September rather than June, and the probability of two cuts this year has fallen. Rising energy prices, hawkish comments from Fed governors, and the confirmation of 15% global tariffs are all pushing back the timeline for easing from both the Fed and the Bank of England. Unless energy prices retreat sharply, rate relief is likely to come later and smaller than investors had hoped.

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