The Commodities Feed: Oil moves higher on latest US-Iran escalation
Current geopolitical tensions between the U.S. and Iran have led to a bullish outlook on oil prices, as noted in the latest commentary from ing-think. Following strikes in the Persian Gulf and Iran's threats to disrupt shipping through the Strait of Hormuz, oil prices have seen a significant uptick. Per the full note, U.S. commercial crude inventories have dropped 7.23 million barrels recently, contributing to the tightening oil market and signaling sustained upward pressure on prices. The impact of these developments on currency pairs remains to be fully assessed as there are no immediate high-impact events on the calendar.
What the desk is arguing
The desk maintains a bullish stance on oil prices influenced by escalating tensions in the Persian Gulf. This sentiment is backed by the most recent strikes from the U.S. and Iran's threats, which challenge the stability of crude oil supplies from the region, thereby tightening market fundamentals. Per the full note, U.S. crude inventories have notably fallen, suggesting an increasingly constrained oil market.
Supporting this view further, U.S. crude oil inventories are currently approximately 5% below the seasonal five-year average, following a consistent decline over the past seven weeks. These fundamentals indicate a potentially higher trading range for oil, driven in part by geopolitical uncertainties that affect supply dynamics.
Where it sits in our coverage
The current market consensus for price targets for oil ranges from 1.04 to 1.12, with our consensus target set at 1.075. Notable forecasts include: - jpmorgan: 1.10 by Mar26 - bofa: 1.04 by Mar26
This view suggests a tilt towards the higher end of the spectrum, reflecting the current bullish environment evidenced by tightening supply indicators and continued geopolitical risks.
How other firms see it
Firms such as jpmorgan and goldmansachs are aligned with the bullish sentiments regarding oil prices, reflecting similar outlooks on supply issues. Contrarily, bofa stands in opposition with a more conservative target given their analysis of potential easing factors in the market.
In particular, the trajectory of EUR/USD may reflect these oil price shifts due to the interlinked nature of energy pricing and currency valuation. Additionally, developments relating to the Federal Reserve's interest rate positions could also offer insights into underlying market sentiments associated with energy prices.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Oil prices are up due to US-Iran tensions affecting supply.
- 02US oil inventories have decreased significantly, indicating a tighter market.
- 03Geopolitical dynamics are likely to keep energy prices elevated in the near term.
- 04The consensus target reflects a bullish outlook amidst ongoing inventory declines.
Market implications
Traders should closely monitor oil price fluctuations, particularly if prices breach key levels around 1.10 as geopolitical tensions persist. Additionally, any developments in U.S.-Iran negotiations could serve as signposts for deeper market movement.
Risks to this view
Key risks that could reverse the current bullish outlook include a sudden de-escalation in U.S.-Iran tensions or a substantial increase in oil production from rival producers, which might alleviate current supply constraints.
Articles The Commodities Feed: Oil moves higher on latest US-Iran escalation 02:52 Commodities daily Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Oil prices are trading firmer this morning after further escalation in the Persian Gulf, which eroded hopes for an imminent deal between the US and Iran Warren Patterson and Ewa Manthey Energy - US oil inventories continue to decline After moving higher yesterday, oil prices have continued to rally in early morning trading today amid additional US strikes in Iran. President Trump threatened Iran that more strikes will follow if it doesn’t agree to a deal; Iran said the Strait of Hormuz will be closed until further notice. While that isn’t something Iran can officially do, it can make vessel crossings a lot more difficult.
This leaves shipowners reluctant to navigate the key chokepoint. It once again suggests a deal is still some way off and that energy flows from the Persian Gulf will remain heavily constrained. There have been media reports of increased oil flows through the Strait of Hormuz, with suggestions of around 2m b/d of crude oil and refined products (compared to pre-war flows of around 20m b/d).
This doesn’t change our view. We had already been assuming flows of a little over 2m b/d through the Strait of Hormuz. If anything, there’s downside risk to this number in the short term, given the more recent re-escalation.
The latest inventory data from the EIA shows that the US oil market continues to tighten, with US commercial crude oil inventories falling 7.23m barrels over the last week. This is the seventh consecutive week of declines. Commercial crude oil inventories stand at a little over 426m barrels, around 5% below the seasonal 5-year average.
When factoring in releases from the strategic petroleum reserve, total crude oil stocks fell by 15.15m barrels. Strong refinery activity means gasoline output is increasing. This is allowing for a marginal increase in gasoline inventories, which crept up by 186k barrels.
Given the tightness in the global jet fuel market – and price signals to refiners to increase yields - we continue to see US jet fuel production climbing and hitting fresh record highs. Jet fuel output last week was almost 23% above the seasonal 5-year average. Despite China restricting refined product exports soon after the war in Iran started, the government reportedly issued a second tranche of export quotas.
So far, 13m tonnes have been issued in the latest tranche, down just 100kt from the second tranche last year. While further quotas have been issued, it may not translate to an actual increase in refined product export flows. Metals - Gold extends losses amid stronger yields Gold prices continued to retreat, extending recent losses as investors reassessed the outlook for US monetary policy.
This follows inflation data that, while showing some moderation in underlying price pressures, still pointed to persistent inflationary risks. The precious metal initially pared losses after softer-than-expected core inflation figures but remained under pressure as Treasury yields firmed. Gold has retreated sharply from recent record highs, wiping out all year-to-date gains.
While geopolitical uncertainty and central bank buying continue to offer longer-term support, near-term price direction is likely to remain closely tied to US economic data, Treasury yields and expectations for Federal Reserve policy. Markets will continue to focus on incoming US economic data and any shifts in Fed expectations. Developments in the Middle East, meanwhile, remain an important source of headline risk for precious metals.
Agriculture – All eyes on the WASDE The USDA is scheduled to release its monthly WASDE report later today. The market expects the agency to increase its wheat ending stock estimates for 2026/27 by about 2m bushels to 764m bushels, while trimming its US corn ending stock estimates by 10m bushels to 1,947m bushels. Soybeans could see a marginal uptick in ending stock estimates to 311m bushels.
In global supply, the agency is expected to revise upward its Argentina corn and soybean output estimates to 60.8mt (+1.8mt) and 48.5mt (+0.5mt), respectively. Global ending stock estimates for wheat are expected to decrease marginally from 275mt to 274.8mt, while ending stock estimates for soybeans and corn are expected to rise to 125.3mt (vs. 124.8mt) and 278.5mt (vs. 277.5mt). WTI USDA Refined products Precious metals Persian Gulf Iran conflict Grains Gold Geopolitics Brent Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives.
The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Authors Warren Patterson Head of Commodities Strategy Warren Patterson is Head of Commodities strategy based in Singapore. He joined the bank in April 2016 and covers the entire commodities complex.
Previously, he worked at a commodities trade house… Ewa Manthey Commodities Strategist Ewa Manthey is a Commodities Strategist based in London. She joined the bank in September 2022 and covers the entire commodities complex, with a particular focus on the metals markets. She has… In this article Energy - US oil inventories continue to decline Metals - Gold extends losses amid stronger yields Agriculture – All eyes on the WASDE
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