The Commodities Feed: Oil extends gains on supply concerns
At a Glance
Lead — The desk believes that rising geopolitical tensions, particularly around US-Iran relations and security concerns in the Strait of Hormuz, will continue to support the rally in oil prices, which are currently above $91 per barrel. Per the full note source, Saudi Arabia's attempts to diversify export routes outside the Persian Gulf could also influence supply dynamics. This bullish sentiment for oil is likely to be reflected in currency movements, particularly within energy-centric nations, as traders adjust their positions ahead of upcoming economic indicators.
Key Takeaways
- 01Brent oil prices have rallied above $91/bbl due to geopolitical tensions and supply concerns.
- 02Saudi Arabia's efforts to diversify export routes could influence oil supply dynamics positively.
- 03Speculative long positions in oil are at their highest since February, indicating a bullish sentiment.
- 04The EUR/USD is sitting at a consensus of 1.1700 amidst rising oil prices and geopolitical risks.
Full Analysis
What the desk is arguing
The desk argues that current geopolitical risks, combined with production concerns, are driving oil prices upward, which has implications for FX trading, particularly with energy-linked currencies. The source highlights that Brent oil has extended its gains for three consecutive sessions, supported by significant market fears regarding supply disruptions following the US government's stance on the Iran deal.
Furthermore, Saudi Arabia's shift to offering crude from alternative locations, such as off the coast of Oman, underscores the strategic efforts to mitigate risks in traditional routes, potentially stabilizing prices. Notably, the speculative net-long positions in oil have increased, indicating an overall bullish market sentiment.
Where it sits in our coverage
Our consensus target for EUR/USD is currently 1.1700, with a range of 1.1200 to 1.2000. Firms such as anz project a March 2026 target of 1.1609, while morganstanley sees a higher target of 1.2000 for the same period.
This desk's perspective aligns with the consensus that anticipates a strengthening of the Euro against the Dollar, particularly as energy prices remain elevated, potentially impacting trade balances. However, this outlook sits towards the upper bound of the consensus spread, reflecting optimism in cross-border energy trades and their FX implications.
How other firms see it
Several firms, including jpmorgan and commerzbank, are aligned with the desk's bullish view on oil's impact on related currencies, suggesting potential upward adjustments in their forecasts for energy-linked currencies. Conversely, firms like scotiabank project more conservative targets for GBP, indicating skepticism on maintaining current levels in some pairs.
Additionally, fluctuations in the USD/JPY directly respond to external commodity price changes, reinforcing the gas and oil prices' influence on broader currency markets. Watching these correlations will be crucial as oil prices evolve in the context of geopolitical tensions.
Market Implications
Traders should watch for oil prices to respond to any further geopolitical developments, particularly in the Strait of Hormuz, as this could impact the EUR/USD pair significantly. A clear break above $91/bbl in oil could spur additional demand for energy-linked currencies.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
UOB | Bullish | 1.1800 |
ING | Neutral | 1.1700 |
Rabobank | Bullish | 1.1800 |
From the original
Articles The Commodities Feed: Oil extends gains on supply concerns Published 08:06 Commodities daily Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Oil prices remained supported by rising geopolitical risks and supply concerns Ewa Manthey and Warren
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4 itemsThe Commodities Feed: Oil rises amid US-Iran conflict
Lead — Oil prices have risen for the fourth consecutive session, primarily fueled by increasing tensions surrounding the US-Iran conflict and the specter of supply disruptions through the strategically vital Strait of Hormuz. Per the full note from ing-think, the situation has elevated risk premiums in the oil market, while a bullish API inventory report indicating a more substantial draw than anticipated further supports the upward trajectory in oil prices. Current trading dynamics suggest an alignment towards higher oil prices, though the absence of scheduled high-impact events in the upcoming month means that traders will be closely monitoring geopolitical developments. The desk expects these conditions to keep oil volatility elevated for the near term, with potential spillover effects into currency markets, particularly those tied to commodity currencies.
The Commodities Feed: Oil near $90 on escalating Middle East risks
Lead — As geopolitical tensions escalate in the Middle East, oil prices remain firmly supported near $90 per barrel, reflecting heightened supply risk perceptions. Per the full note [source], recent attacks on vessels in the Strait of Hormuz, coupled with renewed fighting in Lebanon, are intensifying concerns over potential regional disruptions that complicate U.S.-Iran negotiations. The increase in speculative positioning, with money managers building net long positions in ICE Brent, underscores bullish sentiment. The commentary highlights the potential for continued price support as geopolitical factors evolve.