The Commodities Feed: Oil rallies as chances of US-Iran deal fade
The desk views the recent spike in oil prices, which surged by 3.8% for ICE Brent to above $82/bbl, as a reflection of deteriorating prospects for a US-Iran diplomatic agreement. Per the full note from ing-think, the rhetoric between the US and Iran is becoming increasingly contentious, complicating any negotiations and fostering further uncertainties in oil supply. This dynamic is significant as the market navigates a transition to normalized flows expected through Q3, while grappling with the implications of Saudi pricing adjustments that could influence market dynamics even without direct triggering events on the calendar.
What the desk is arguing
The desk suggests that the rally in oil prices is directly tied to the growing obstacles in US-Iran negotiations, signaling potential supply constraints. As noted by ing-think, Iran's insistence on demanding fees for ship transit through the Strait of Hormuz indicates a refusal to back down, making a diplomatic resolution seem remote. This increasingly aggressive stance from Iran brings uncertainty to an already volatile oil market.
Supporting this perspective, the desk highlights that Brent markets are expected to average $80/bbl this quarter, despite potential shifts spurred by Saudi Arabia's recent pricing cuts. Notably, these cuts of up to $0.50/bbl indicate the influence of changing buyer behavior, particularly in Asia.
Where it sits in our coverage
The consensus target for oil prices suggests a range around $80/bbl to $85/bbl, with firms firmly placing their expectations in this tight band. For example: - jpmorgan: $83/bbl by Dec-26 - bofa: $82/bbl by Dec-26 - citi: $84/bbl by Dec-26
With our expectations centered around an average of $80/bbl, the desk is closely aligned with bofa, while diverging slightly from jpmorgan, lying at the lower end of the consensus.
How other firms see it
Firms like jpmorgan and citi tend to forecast upward trajectories for oil prices amid supply constraints, aligning with the desk's view. In contrast, bofa presents a more cautious perspective, positioning for a downward adjustment based on broader market trends.
Traders should monitor how USD/CAD and AUD/USD react to these fluctuations in oil prices, as both currency pairs exhibit sensitivity to changes in energy prices and resultant market sentiment driving those currencies.
What the calendar says
With no high-impact events on the immediate calendar, traders should focus on upcoming geopolitical developments, particularly any shifts in US-Iran discussions that could alter the current pricing dynamics in oil.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Oil prices have surged due to growing tensions between the US and Iran, complicating potential diplomatic resolutions.
- 02Brent crude is expected to average around $80/bbl this quarter, with volatility driven by geopolitical factors.
- 03Saudi Arabia's price adjustments reflect changing demand patterns, particularly from Asian buyers.
- 04Traders should watch USD/CAD and AUD/USD for sensitivity to oil price movements.
Market implications
Watch for Brent crude to sustain momentum above $82/bbl, as further tensions could provoke price spikes. Pricing behavior from Saudi Arabia will also be critical in assessing market responses.
Risks to this view
A rapid de-escalation in Middle Eastern tensions or a surprising breakthrough in US-Iran negotiations could rapidly reverse the current bullish sentiment in oil markets, pushing prices lower.
Articles The Commodities Feed: Oil rallies as chances of US-Iran deal fade Published 02:40 Commodities daily Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Oil prices are seeing renewed strength amid additional signs that a US-Iran deal remains difficult to achieve Warren Patterson and Ewa Manthey Energy - US-Iran deal obstacles Oil prices rallied yesterday, with ICE Brent settling 3.8% higher on the day, taking it back above $82/bbl. This strength continued in early morning trading today. Developments over the last 24 hours or so demonstrate once again that negotiations between the US and Iran are unlikely to proceed smoothly.
There are suggestions that Iran wants to ban US and Israeli ships from the Strait of Hormuz, while also seeking compensation from hostile countries before they can use the strait again. In addition, Iran still wants to charge fees for ships transiting the Strait of Hormuz, in the form of service fees rather than a toll. There doesn’t seem to be much of a compromise, which ultimately makes it more difficult to reach a sustainable deal.
Despite clear signs of progress in recent days, the tenor of the rhetoric and growing distrust between the US and Iran mean things could go from bad to worse once again. For now, we hold onto our view that flows will start to normalise through the third quarter, which leaves us expecting Brent to average $80/bbl this quarter. However, there's plenty of risk and uncertainty to this view.
Saudi Arabia cut its official selling prices for almost all crude grades and to all destinations for September loadings. Arab Light into Asia was cut by S$0.50/bbl to a $2/bbl discount to the benchmark. There has been a push by Asian buyers for the Saudis to cut their official selling prices (OSPs) amid the escalation in the Red Sea.
It means that some tankers are taking the longer and more expensive shipping route around Africa. Metals - Copper nears record high Copper traded near record highs, with LME prices trading comfortably above $14,000/t, amid tariff-related stockpiling into the US and increasingly tight physical conditions outside the country. The latest move higher was also fuelled by reports that the DRC had moved to restrict exports of copper concentrates.
While the headlines initially raised supply concerns, the impact on the refined market is likely to be limited given that most of the DRC's copper is exported as cathode rather than concentrate. Even so, the news reinforced an already bullish market backdrop characterised by low inventories, tight concentrate availability and ongoing supply disruptions. Copper fundamentals remain supportive.
Tight physical markets, low inventories and constrained mine supply should continue to underpin prices. With copper trading close to record highs, any disappointment on US tariff measures could trigger a period of consolidation. In other base metals, nickel fell towards its lowest level since mid-July after reports that Indonesia may grant additional ore production quotas to a major producer.
The prospect of higher Indonesian output renewed concerns over oversupply. This reinforced expectations that the nickel market will remain comfortably supplied through the second half of the year. We remain cautious on nickel.
Continued Indonesian supply growth is likely to keep the market in surplus and limit any upside potential. Agriculture – UNICA report lower sugarcane crush The latest fortnightly report from the Brazilian Sugarcane and Bioenergy Industry Association (UNICA) shows that sugar cane crushing in Central-South Brazil stood at 69.8mt in June. This is down 14.5% from a year ago.
Sugar production fell 26.3% year-on-year to 3.9mt, as mills diverted more cane towards ethanol production. Sugar prices spent much of the year trading below ethanol parity, pushing producers to increase their ethanol mix. Around 44.5% of cane was allocated to sugar production, lower than 52.3% in the same period last year.
Cumulative sugar production so far this season stands at 10.8mt, down 12.4% YoY, while the cumulative cane crush has risen 3.8% YoY to 214.5mt. Data from Cameroon’s National Cocoa and Coffee Board shows that cocoa output fell 20% YoY to 247.9kt in the 2025/26 season. It’s the lowest level in five years, and reverses the record harvest produced a year ago.
The decline was primarily driven by adverse weather conditions, ageing plantations, and deteriorating soil fertility. Meanwhile, cocoa exports fell 34.7% YoY to 125.5kt, while domestic grindings declined 13.1% YoY to 95.9kt. WTI Sugar Strait of Hormuz Softs Saudi Arabia Persian Gulf Nickel Middle East Indonesia Geopolitics Copper Cocoa 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-Iran deal obstacles Metals - Copper nears record high Agriculture – UNICA report lower sugarcane crush
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