Three weeks ago, everyone decided the energy trade was over.

The US-Iran ceasefire got signed. Brent crude dropped 15% in days. XLE fell from the $63 range to the low $50s. Traders who’d ridden the Hormuz premium all year got flushed out at the worst possible time, selling energy right at the bottom because a piece of paper said the war was done.

I said wait.

I said the market was front-running a best-case scenario. That peace deals don’t normalize oil flows overnight. That the Strait of Hormuz doesn’t reopen on a handshake.

Last week, I was proven right… in the most dramatic way possible.

What Happened While You Were Gone

Trump declared the ceasefire “over” after Iran attacked commercial vessels transiting the Strait of Hormuz. US forces struck roughly 90 Iranian military targets, with CENTCOM saying the operation was aimed at protecting commercial shipping. Iran retaliated, striking US bases in Bahrain and Kuwait. Trump said further negotiations would be “a waste of time” and reimposed the US naval blockade.

Well that was fast…

The peace deal is dead. The Strait is back in play. And oil knows it.

Brent surged more than 5% on Wednesday alone, its biggest single-day move in weeks, and extended gains above $79 a barrel Thursday morning.

The US-led Joint Maritime Information Center raised its threat assessment for ships transiting Hormuz to “severe.”

A shipping executive told reporters his company doesn’t “feel secure” moving vessels through the strait right now.

The supply risk premium that the market priced out in three days is pricing right back in.

The Setup on XLE

Here’s what the chart on the Energy Select Sector ETF (XLE) looks like heading into this week.