YCC CAPITAL Commodity & Energy Strategy August 12, 2026 Gold’s first-half collapse was not simply a failed inflation hedge or a temporary bout of speculative excess. It was a stress test for the entire architecture of safe assets. After touching a record $5,405/oz on January 29, international gold prices reversed violently, falling to roughly $4,002/oz by the end of June, a drawdown of more than 30%. Volatility rose sharply as markets moved from pricing geopolitical escalation and rapid Federal Reserve easing to confronting stubborn inflation, resilient U.S. growth and a higher-for-longer cost of capital. At YCC Capital, we think the lesson extends far beyond gold. Investors have spent decades using “safe haven” as though it were a single category. It is not. Cash that meets tomorrow morning’s margin call, Treasury bills that can be pledged as collateral, and gold held outside the credit system solve fundamentally different problems. In a genuine crisis, the distinction is similar to the difference between carrying cash, owning insurance and having a spare key: all provide security, but not for the same emergency. The First-Half Gold Shock Was a Repricing of Opportunity Cost The first phase of 2026 was driven by an unusually powerful feedback loop. Geopolitical anxiety, enthusiasm around “de-dollarization” and speculative positioning reinforced one another, producing repeated record highs. Gold set new peaks 12 times before January 29. The market was effectively paying in advance for several highly bullish outcomes at once: escalating conflict, weakening confidence in the dollar and aggressive Fed easing. That combination did not materialize. Instead, U.S. economic activity remained solid and inflation stayed above target. On July 29, the Federal Reserve maintained the federal-funds target range at 3.50%-3.75% by a 9-3 vote, with the three dissenters preferring a 25-basis-point increase. The Fed explicitly described economic activity as expanding at a solid pace while inflation remained elevated. (Federal Reserve) This matters enormously for gold because gold has no yield. Its biggest competitor is not another metal; it is the return available on highly liquid interest-bearing dollar assets. When real yields are attractive, the insurance premium embedded in gold becomes expensive to carry. Investors living through ordinary household finance intuitively understand this trade-off. A safe full of cash may feel comforting, but if a deposit account suddenly pays a meaningful real return, the cost of leaving money idle becomes impossible to ignore. We therefore interpret the first-half selloff as a violent clearing of excessive safe-haven premium accumulated during the previous two years rather than evidence that gold has lost its strategic role. Source: Bloomberg, YCC Capital The Dollar Remains the Liquidity King The fashionable conclusion that rising geopolitical fragmentation must produce a rapidly declining dollar is too simplistic. The dollar remains embedded in the plumbing of global finance. According to the BIS, the dollar was on one side of 89.2% of global foreign-exchange transactions in April 2025, up from 88.4% in 2022. Every one of the ten most heavily traded currency pairs still involved the dollar. (Bank for International Settlements) Reserve data tell a similarly nuanced story. IMF figures show the dollar’s share of allocated official foreign-exchange reserves rose to 57.13% in the first quarter of 2026. The dollar is therefore not experiencing anything resembling an imminent monetary collapse. (IMF Data) The more useful framework is functional segmentation. Dollar cash and Treasury bills remain extraordinarily difficult to replace for immediate payments, collateral and global debt service. Longer-dated Treasuries are different: they introduce significant duration, inflation and term-premium risk. Gold is different again. It cannot compete with dollars for immediate settlement, but it does not depend on an issuer’s promise to repay. China illustrates the limitations of the alternative-currency narrative. Renminbi settlement can create useful redundancy in selected bilateral trade corridors, but China’s capital controls, uneven legal transparency, restricted convertibility and relatively shallow hedging markets constrain the currency’s ability to become a genuine global financing substitute. A payment channel is not the same thing as a reserve ecosystem. We expect Beijing to continue promoting monetary alternatives, but we remain skeptical that these initiatives can materially displace the dollar’s global balance-sheet role over any reasonable investment horizon. Gold Is Institutional Insurance, Not Cash The strongest long-term case for gold is therefore not “the dollar is dying.” It is that increasingly fragmented political and financial systems raise the value of owning an asset with no issuer, no maturity date and no conventional counterparty liability. The distinction became much clearer after the March 2020 Treasury-market liquidity dislocation and the freezing of Russian official reserves in 2022. Both episodes demonstrated that an asset’s quoted value is not identical to its usability during stress. Security now has at least three dimensions. The first is liquidity security: can the asset meet payments, margin calls and debt service immediately? Dollar cash and T-bills dominate here. The second is duration security: can an institution match long-dated liabilities without accepting excessive interest-rate risk? High-quality bonds serve this purpose, but their defensive qualities weaken when inflation and term premiums rise. The third is institutional security: can wealth remain accessible if sovereign, sanctions or legal-jurisdiction risk becomes extreme? Gold has an unusually important role in this layer. That explains persistent official-sector demand. Yet central-bank buying should never be mistaken for an unconditional price floor. When emerging markets face severe currency pressure or dollar shortages, gold itself can be sold to generate liquidity. The reserve asset proves its usefulness precisely because it can be mobilized. Source: Bloomberg, YCC Capital Our Second-Half View: Bottoming First, Repair Later We expect the second half of 2026 to remain volatile rather than develop into a clean bull market. Our base case is a bottoming process during the third quarter followed by a more constructive recovery in the fourth quarter. Near term, the principal obstacle remains U.S. monetary policy. The July FOMC outcome confirmed that policymakers are not in a rush to ease, while three members already favored another hike. That backdrop should keep real rates relatively restrictive and preserve the appeal of cash and short-duration Treasuries. We

YCC CAPITAL Commodity & Energy Strategy June 29, 2026 Executive Summary Financial markets often celebrate the reopening of a strategic chokepoint as though the crisis itself has disappeared. Yet history rarely works that way. A highway may reopen after an earthquake, but logistics companies, insurers, manufacturers and consumers do not instantly resume normal behavior. Trust rebuilds much more slowly than physical infrastructure. The reopening of the Strait of Hormuz represents precisely this type of moment. The most severe phase of the Middle East energy shock has likely passed, and markets are appropriately removing the extreme tail-risk premium associated with a complete disruption of Gulf oil exports. However, investors should resist equating reopening with normalization. Physical supply chains, shipping confidence, insurance pricing and production capacity all recover on different timelines. From YCC Capital’s perspective, this episode offers three structural lessons that extend well beyond crude oil itself. First, the global energy system proved considerably more resilient than consensus expected. Strategic petroleum reserves, alternative pipeline networks, spare production capacity, expanding U.S. exports and adaptive trade flows prevented an outright breakdown of global oil markets despite one of the world’s most strategically important shipping lanes becoming impaired. Second, geopolitical risk leaves lasting scars. Shipping lanes can reopen overnight on paper, but restoring confidence among insurers, tanker operators and multinational commodity traders is a much slower process. The market is transitioning from pricing catastrophic disruption toward pricing persistent friction. Third, investors should increasingly shift attention away from energy beta toward structural AI alpha. The first phase of the crisis rewarded broad energy exposure. The next phase increasingly favors commodities and economies that benefit from the global AI investment cycle rather than simply higher oil prices. These lessons will likely define asset allocation long after headlines surrounding the Strait of Hormuz fade. The Global Energy System Passed an Unexpected Stress Test Few expected global oil markets to remain as orderly as they ultimately did. Given that nearly one-fifth of internationally traded crude typically passes through the Strait of Hormuz, many forecasts anticipated sustained triple-digit oil prices and severe supply shortages. Neither materialized. The explanation lies in the remarkable flexibility embedded within today’s global energy system. Several supply-side adjustment mechanisms activated simultaneously. Strategic petroleum reserves across major consuming nations were partially released to cushion near-term shortages. Alternative export pipelines bypassing Hormuz absorbed part of the disruption. OPEC producers with available spare capacity modestly increased production. Meanwhile, U.S. crude exports expanded further, reinforcing America’s increasingly important role as the world’s marginal supplier of energy security. Trade routes also adapted more quickly than expected. Importers diversified purchasing toward non-Hormuz sources wherever possible, while refiners adjusted feedstock mixes to maximize operational flexibility. Collectively, these adjustments significantly reduced the effective global supply loss relative to the headline disruption. Importantly, resilience did not originate solely from producers. Consumers also adjusted. High energy prices function much like higher interest rates—they gradually suppress demand. Throughout Asia, petrochemical manufacturers delayed production schedules as feedstock costs climbed. Textile producers reduced operating rates as polyester input prices increased. Airlines faced rising jet fuel expenses that translated into higher ticket prices and softer discretionary travel demand. Even seemingly unrelated industries found creative ways to conserve scarce inputs, illustrating how energy inflation eventually permeates every corner of the real economy. Anyone who has watched a household budget adjust after gasoline prices suddenly jump understands this dynamic intuitively. Families postpone vacations, drive less frequently and delay discretionary purchases. Entire economies behave similarly—only at much larger scale. The simultaneous adjustment of supply and demand explains why the energy shock never evolved into a systemic collapse. Looking ahead, international energy balances could gradually return toward structural surplus conditions if production normalizes as projected. Current industry estimates continue to suggest global supply growth may outpace demand through 2027, limiting the probability of a sustained supercycle in crude prices despite elevated geopolitical uncertainty. Reopening Does Not Mean Recovery Markets naturally respond to headlines. Supply chains respond to incentives. The distinction matters. The recent U.S.-Iran understanding that facilitated the reopening of the Strait substantially reduced the probability of an outright energy catastrophe. Brent crude rapidly surrendered much of its geopolitical premium following the announcement. However, reducing tail risk should not be confused with restoring normal market functioning. Several obstacles remain. Maritime mines must still be cleared. Navigation systems require continuous security verification. Shipping operators need confidence that vessels will not become targets once again. Insurance companies remain cautious, and war-risk premiums rarely disappear immediately after ceasefires. Moreover, temporary political agreements remain exactly that—temporary. The current framework postpones rather than resolves more fundamental disputes surrounding sanctions, nuclear negotiations, maritime security and regional military competition. Consequently, shipping companies are unlikely to immediately return to pre-crisis operating patterns. The experience of the Red Sea offers an instructive comparison. Despite improvements in security conditions, commercial shipping volumes remained well below historical averages for an extended period because confidence recovered much more slowly than physical accessibility. Hormuz is unlikely to prove different. The market must also recognize another overlooked reality. Reopening shipping lanes does not automatically restore production. During the disruption, inventories accumulated rapidly across several exporting regions, forcing temporary production shut-ins. Restarting oil fields is rarely as simple as turning a switch. Older reservoirs requiring water or gas injection may take months to stabilize. Supporting infrastructure—including pipelines, storage facilities, ports, engineering services and specialized labor—must all synchronize before production fully normalizes. Accordingly, we expect oil price volatility to moderate while average price levels remain above pre-conflict norms for an extended period. The era of crisis pricing may be ending. The era of friction pricing is only beginning. Energy Security Is Becoming a Structural Investment Theme One of the most important consequences of the crisis may not be oil prices themselves but rather the strategic decisions governments make afterward. Countries increasingly recognize that dependence upon a single maritime chokepoint represents an unacceptable national vulnerability. The United Arab Emirates has already accelerated efforts to reduce reliance on Hormuz through expanded pipeline capacity and major investments along its eastern coastline.

YCC CAPITAL Commodity & Energy Strategy June 27, 2026 Executive Perspective Every major oil shock tells the same story at first glance: prices surge, headlines scream about shortages, and markets brace for recession. Yet history repeatedly reminds investors that the real economic consequences are rarely determined by the initial disruption alone. Instead, they are shaped by what follows—how quickly production returns, how much spare inventory remains, and whether delayed demand eventually re-emerges. The current Middle East supply disruption appears to fit that historical pattern. Although crude prices have retreated significantly from their spring highs, the decline should not be mistaken for a normalization of global energy markets. Much of the apparent resilience has been purchased through extraordinary inventory drawdowns, emergency supply substitution from non-Middle Eastern exporters, and temporary demand destruction caused by elevated shipping costs and record insurance premiums. From YCC Capital’s perspective, investors risk focusing excessively on today’s oil price while overlooking tomorrow’s supply constraints. Physical oil infrastructure cannot simply be switched back on overnight. Damaged wells, transportation networks, export terminals, and storage facilities require months—not weeks—to restore. Meanwhile, inventories that have cushioned markets throughout the first half of the year are steadily being depleted. Like a household relying on its savings account after losing income, the global oil market has managed to avoid immediate crisis by spending accumulated reserves. Eventually, however, those savings become exhausted unless income recovers. The same logic increasingly applies to global petroleum inventories. Our base case therefore remains that crude oil prices will remain structurally elevated throughout the second half of 2026, even if geopolitical tensions gradually stabilize. Why Hasn’t Oil Reached Crisis Levels? The most surprising feature of recent months has not been the supply disruption itself, but rather the market’s relatively orderly response. Since the outbreak of the U.S.–Iran conflict and repeated disruptions around the Strait of Hormuz, roughly one quarter of global seaborne petroleum trade has been affected. Seven major Middle Eastern producers collectively reduced output dramatically, while global oil production fell sharply from pre-conflict levels. Under normal circumstances, such a shock might have pushed Brent crude well above previous historical peaks. Instead, prices briefly approached US$120 per barrel before retreating toward the US$80 range. This resilience reflects three temporary stabilizers rather than any lasting improvement in market fundamentals. Supply Substitution Has Offset Part of the Shock The first stabilizer has been a rapid increase in exports from producers outside the Middle East. North America, Latin America and Eastern Europe have collectively increased crude exports substantially, offsetting roughly half of the lost Middle Eastern supply. Compared with February levels, Middle Eastern exports declined by approximately 324 million barrels by May, while total global exports fell by only 148 million barrels. North America alone contributed nearly 100 million additional barrels of exports during this period, with Latin America and Eastern Europe also expanding shipments meaningfully. The United States has played a particularly important role. American crude exports recently reached record levels while net crude imports fell close to zero, demonstrating the remarkable flexibility of North American energy production. However, this substitution should not be mistaken for unlimited spare capacity. Most major non-OPEC producers are already operating near practical production limits. Incremental supply becomes progressively more expensive as production expands, suggesting that further substitution will become increasingly difficult if Middle Eastern disruptions persist. Source: Bloomberg, YCC Capital Strategic Inventories Have Become the World’s Shock Absorber The second stabilizing force has been unprecedented inventory drawdowns. Rather than allowing domestic shortages to develop, governments have increasingly relied on commercial and strategic petroleum reserves. The United States offers perhaps the clearest example. Since the conflict began, U.S. crude inventories have fallen by approximately 96 million barrels, including over 75 million barrels released from the Strategic Petroleum Reserve (SPR). Reserve levels have now declined to their lowest point since the 1980s. Importantly, this pace of depletion exceeds that observed during the Russia–Ukraine energy crisis in 2022. These releases have allowed American refiners to maintain high utilization rates despite declining imports, preserving gasoline availability and helping stabilize consumer inflation. Japan, China and several OECD economies have adopted similar inventory management strategies. Yet inventories represent a finite buffer rather than a renewable source of supply. Markets often underestimate this distinction. Releasing reserves can smooth short-term volatility, but every barrel withdrawn today represents one less barrel available for future emergencies. The longer geopolitical disruptions continue, the smaller this protective cushion becomes. Demand Has Been Delayed—Not Destroyed The third factor preventing a sustained oil spike has been temporary demand suppression. High crude prices naturally reduce consumption, but today’s weakness appears less like permanent destruction and more like postponed purchasing. Global seaborne crude imports declined approximately 17% between February and May, according to shipping data. China accounted for much of this decline. Imports from seven major Middle Eastern producers fell to their lowest recorded levels, while imports from alternative suppliers increased only modestly. Domestic refinery utilization also weakened noticeably, reflecting delayed downstream demand. However, this should not necessarily be interpreted as a structural collapse in Chinese energy consumption. Instead, Chinese refiners appear to be utilizing existing inventories while waiting for more favorable pricing conditions. Once prices moderate and logistics improve, some of this deferred demand is likely to return. Other Asian importers tell a similar story. Japan, South Korea and Singapore all experienced temporary import declines during the peak of price volatility before gradually rebuilding purchases as markets stabilized. Demand has therefore been shifted through time rather than permanently eliminated. For investors, this distinction matters enormously. Delayed demand frequently returns precisely when inventories are already depleted, creating the conditions for renewed price pressure. Supply Recovery Will Be Much Slower Than Production Shutdowns Markets frequently assume that once geopolitical tensions ease, oil production quickly resumes. History suggests otherwise. Restarting oil production is considerably more complicated than shutting it down. Oil reservoirs depend upon carefully balanced underground pressure systems. Extended shutdowns alter these pressure dynamics, increasing the risk of water intrusion, sediment contamination and declining production efficiency when operations resume. Middle Eastern carbonate

High Oil Prices, Inflationary Pulses, and the Risk of Transatlantic Policy Scissors YCC Perspective: At YCC Capital, our global macro value lens prioritizes capital-flow dynamics and gaps between prevailing narratives and underlying realities. The protracted US-Iran stalemate and depressed shipping volumes through the Strait of Hormuz constitute a textbook geopolitical supply shock. Its transmission into global inflation, central bank policy paths, and cross-asset pricing is asymmetric across economies—particularly relevant for our positioning in Asia and RMB assets, where energy import diversification provides relative insulation compared with more vulnerable regional peers. This analysis dissects the inflationary impulse, the probability of a Fed-ECB policy scissors, and the resulting implications for bonds, equities, and currencies. Key Takeways High oil prices have elevated inflation across multiple economies. The US-Iran conflict has remained locked in a three-month stalemate as of early June. Hormuz Strait daily transit volumes have collapsed to single digits—approximately 5% of pre-conflict levels—with no meaningful recovery. Brent and WTI midpoints have shifted from ~66 USD to ~101 USD (+53%). Energy CPI now exceeds both core and headline inflation in the US (17.9%), Canada (~18%), Eurozone (10.8%), and UK, confirming a potent imported inflation pulse. Japan remains an outlier due to targeted energy subsidies. Energy inflation is likely to create a policy scissors between the Fed and ECB. Eurozone inflation pressures feel more binding: single mandate, higher energy dependence (non-exporter status), and inflation expectations that have spiked to 2022 highs. US dual mandate and resilient domestic energy production afford the Fed greater flexibility. Market pricing implies <1% probability of a June Fed hike versus >90% for an ECB hike. Should the ECB move first, the resulting narrowing of the USD-EUR rate differential would provide tactical support to the euro and cap the DXY. Bond markets face more persistent pressure than equities; FX shows RMB resilience. Over the past three months, global bonds adjusted broadly higher in yield as rate-cut expectations were pared back. Equities exhibited clear bifurcation: Europe and energy-vulnerable markets underperformed while AI-exposed US indices and select Asian markets (e.g., Korea) proved more resilient. Looking forward, we expect the 10Y UST yield midpoint to grind higher. On FX, RMB has appreciated against the USD while JPY, CHF, and EUR depreciated—supported by China’s diversified energy sourcing and export outperformance amid regional supply-chain stress. A policy scissors would likely keep the USD in a wide trading range with mild RMB appreciation bias persisting. Risk factors remain elevated. Further escalation in the Middle East, an oil price spike beyond current levels, or an unexpectedly hawkish Fed reaction function could materially alter the base case. Sources: Bloomberg, YCC Capital analysis. Data as of early June 2026 unless otherwise noted. High Oil Prices Have Elevated Inflation Across Multiple Economies The US-Iran conflict, which erupted earlier this year and entered a protracted stalemate by early June, has now persisted for approximately three months without a durable de-escalation agreement. Throughout this period, maritime transit volumes through the Strait of Hormuz—the critical chokepoint for roughly 20% of global oil trade—have remained severely depressed. Average daily transits have fallen into the single digits, representing roughly 5% of pre-conflict throughput. There are no clear signs of normalization. Constrained supply has kept international crude prices elevated and structurally higher than the pre-conflict equilibrium of approximately 66 USD per barrel. The post-conflict midpoint has shifted to around 101 USD—a 53% increase. This sustained deviation is transmitting directly into global inflation via higher energy input costs, creating a classic imported inflation shock. Energy Inflation Transmission: Cross-Country Evidence In the three months since the conflict intensified, energy CPI has materially outpaced both core and headline measures in most major economies (April 2026 data). The United States recorded energy inflation of 17.9% against headline CPI of 3.8%. Canada saw similar extremes in the 17–20% range. The Eurozone and broader Europe registered energy inflation between 10% and 15%, well above their respective core and headline prints. The United Kingdom followed a comparable pattern. Japan stands apart: its energy CPI remains in negative territory, though the pace of deflation has narrowed meaningfully versus the pre-conflict baseline. This divergence largely reflects Japan’s aggressive fiscal response—most notably the 3.11 trillion JPY supplemental budget that established a dedicated Middle East emergency energy reserve to cushion domestic price pass-through. Without such buffers, the inflationary impulse would likely have been more uniform globally. The key takeaway is that a geopolitically induced oil price regime shift—rather than a transitory spike—has already embedded a durable inflationary pulse into multiple large economies. This is not merely a headline effect; it is feeding into core inflation expectations and, critically, into central bank reaction functions. Markets are now pricing higher-for-longer policy rates in several jurisdictions, with the Euro area appearing particularly sensitive. Energy Inflation and the Emerging US-Europe Policy Scissors Negotiations between the US and Iran have continued in fits and starts. While markets briefly priced in the possibility of an extended ceasefire or de-escalation framework in late May, renewed mutual strikes quickly dispelled that optimism. Key uncertainties persist around any potential extension of the current pause, restoration of Hormuz transit, and the stance of Israel. June’s cluster of global central bank meetings will therefore occur against a highly fluid geopolitical backdrop, with oil prices and negotiation outcomes remaining live variables. Relative to the United States, the European Central Bank faces a more acute inflation challenge. April data showed Eurozone energy inflation at 10.8% and headline CPI at 3.0%—already above the 2% target. US comparables were 17.9% energy and 3.8% headline. While the numerical gaps are not enormous, three structural factors tilt the balance toward greater ECB urgency: Energy dependence asymmetry: The United States is a net oil exporter with substantial domestic production flexibility. The Eurozone remains a large net importer with limited short-term substitution options. Inflation expectation dynamics: Eurozone long-term inflation expectations have surged to levels last seen during the 2022 energy crisis peak. US expectations, by contrast, have remained more contained—even below the levels observed during the 2025 tariff-related inflation scare. Institutional mandate differences: The ECB