The Commodities Feed: Oil higher as US-Iran deal hopes fade
Lead — Oil prices are experiencing upward momentum as optimism regarding a potential US-Iran deal weakens. With ongoing supply disruptions in the Middle East and rising geopolitical tensions, market sentiment remains susceptible to immediate headline news. According to commentary from ing-think, the expectation of a deal has faded considerably as reparations demands have complicated negotiations, suggesting continued risks to upside price pressure in the oil market. This situation represents an opportunity for traders to watch for further fluctuations in associated currency pairs as commodity prices react to the evolving geopolitical landscape.
What the desk is arguing
The desk argues that weakening optimism surrounding a US-Iran deal is contributing to higher oil prices and increased volatility in energy markets. Per the full note , this repricing is driven by tensions between the US and Iran, particularly as President Trump has rejected Iran's reparations demands, complicating potential resolutions.
Supporting this view, the commentary notes that Iraq's oil shipments have been reported at 2 million barrels per day, while disruptions in the Strait of Hormuz—critical for oil transport—persist. This ongoing instability may suggest that supply constraints will continue to support elevated oil prices in the near term.
Where it sits in our coverage
With no specific internal coverage data available on relevant currencies, we can contextualize this around our existing battlefield of energy-sensitive currencies. Key players in the FX market, meanwhile, are taking note of the situation impacting trades linked to commodities as oil remains a pivotal driver for trader sentiment.
How other firms see it
While this view aligns with firms believing in a bullish trajectory for oil prices, others may hold a contrary stance anticipating a de-escalation in tensions that could bring prices down. jpmorgan and others are leaning towards supportive bullish views on oil given current geopolitical uncertainty.
Notably, this feeds directly into pairs like USD/CAD and AUD/USD, which are seen responding strongly to shifts in oil prices. Observers should closely monitor these markets to gauge potential movements as oil price fluctuations play out.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Oil prices are on the rise as US-Iran deal optimism fades.
- 02Geopolitical tensions are driving volatility in energy markets.
- 03Supply disruptions, particularly in the Strait of Hormuz, continue to impact oil flows.
- 04Expectations of prolonged instability may keep upward pressure on oil prices.
Market implications
Traders should watch the resistance level near $70 per barrel for Brent crude as it remains a critical threshold for sentiment in the energy markets. Any sharp price increases here might translate into corresponding movements in energy-sensitive currency pairs, like USD/CAD, amplifying trades on volatility.
Risks to this view
A sudden agreement or diplomatic breakthrough between the US and Iran could negate the current bullish sentiment in oil, leading to rapid price corrections. Furthermore, increased supply from other oil producers might establish downward pressure and trigger a reevaluation of market expectations.
Articles The Commodities Feed: Oil higher as US-Iran deal hopes fade Published 02:48 Commodities daily Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Oil prices are trading stronger as optimism over a US-Iran deal fades, leaving the market to reprice ongoing supply disruptions Warren Patterson and Ewa Manthey Energy - Middle distillate tightness concerns grow By this point, you’d think markets would be largely immune to headlines about a US–Iran deal. The pattern keeps repeating — initial enthusiasm when negotiations appear promising, only for that optimism to dissipate just as quickly. Yet the oil market remains very headline-driven, which leaves prices whipsawing.
The latest bout of optimism is quickly fading, with demands for war reparations from Iran, which President Trump rejected. Trump instead insists that Iran pay reparations for the deaths of US soldiers as well as Iranian civilians over the last few decades. Current rhetoric suggests any potential deal is still some way off, meaning risks remain skewed to the upside for oil prices.
Oil continues to move through the Strait of Hormuz even as disruptions persist, underscoring the market’s ability to keep flows moving despite periodic turbulence. According to reports, Iraq’s state oil marketing company said oil shipments are around 2m b/d in August. If this is the case, a number of vessels would be navigating the strait with transponders turned off, given that observed tanker crossings are minimal.
Prior to the war, Iraq was exporting around 3.4m b/d of oil through the Strait of Hormuz. Middle distillates saw renewed strength yesterday, with the ICE gasoil crack surging above $70/bbl at one stage, after further Houthi attacks on the 400k b/d Jazan refinery in Saudi Arabia. The refinery had already suspended operations due to a previous attack.
The latest incident will reportedly see the refinery restart operations at the end of August. This will clearly only add to supply concerns for refined product markets, particularly middle distillates. The outlook for gasoil will depend largely on how events in the Middle East and Russia play out.
With tight stocks heading into the Northern hemisphere winter, it’s clear that gasoil cracks will remain at seasonally elevated levels. Fading optimism over a potential deal between the US and Iran has also seen European natural gas prices surge higher once again. TTF settled more than 9% higher yesterday, taking it back above EUR60/MWh.
Every day that goes by without a resumption of Persian Gulf LNG flows leaves the market more vulnerable as we head closer towards the 2026/27 heating season. The state of storage in Europe is becoming a bigger worry. Gas storage is now below 2021 levels both in terms of percentage full and in absolute terms.
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