Oil rises as concerns over Houthi attacks on Saudi Arabia eclipse supply recovery
Recent attacks by Yemen's Houthi forces on key Saudi Arabian airports have raised concerns about geopolitical stability in the region, overshadowing the anticipated supply recovery in crude oil. This resurgence of risk is contributing to upward pressure on oil prices and consequently strengthens demand for safe-haven currencies like the USD and JPY. As investors reassess their risk exposure in light of these developments, the market is likely to remain volatile, particularly amid ongoing geopolitical tensions.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.075 (median across 8 firms), with Goldman at the upper bound (1.12) and BofA at the lower (1.04). The market's reaction to Houthi attacks could align closely with the outlook presented by firms like JPMorgan, which remain cautiously optimistic in their forecast.
How firms align
JPMorgan's target of 1.10 indicates a similar approach to the current market sentiment that sees increased risk premium priced into oil and related currencies. Conversely, BofA's lower target of 1.04 reflects a more bearish stance that diverges from the prevailing risk-off sentiment.
What the data shows
The recent developments underscore a heightened risk environment, warranting closer attention to shifts in oil prices and their implications for currency pairs. For comprehensive analysis, refer to /research/oilriskpremiuminsight.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Oil price gains driven by Houthi attacks may support USD and JPY.
- 02Increased geopolitical risk adds volatility to the FX market.
- 03Watch for USD/JPY resistance at 150.00 amid risk-off sentiment.
Market implications
Traders should keep an eye on Brent crude levels for signals on FX positioning, especially if prices break above $90. Any sustained increases could push the USD and JPY higher as safe havens, affecting our consensus targets.
Risks to this view
A de-escalation in Houthi attacks or signs of increased stability in Saudi Arabia would likely undermine the current bullish sentiment surrounding safe-haven assets, potentially leading to a significant reversal in the USD and JPY.
Sentiment by currency
USD+EUR~JPY+GBP~Composite USD score: +0.65
Sources & References
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