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FX BANK FORECAST · COVERAGE
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Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 30 institutional desks. No promotion.
FX BANK FORECAST · COVERAGE
Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 30 institutional desks. No promotion.
The ongoing tension between the US and Iran is contributing significantly to rising oil prices, with ICE Brent climbing 9.6% to over $83 per barrel as military hostilities escalate. Per the full note from ing-think, the US has reimposed its blockade on Iran, which analysts believe is more impactful than previous sanction adjustments. Market sentiment indicates that higher oil prices have not yet prompted Washington to pursue de-escalation, underscoring a precarious balance in energy markets. As traders navigate this volatile environment, attention should be focused on oil price movements and their implications for broader currency pairs affected by energy inflation.
The FX desk believes that the significant surge in oil prices due to renewed US sanctions on Iran will have downstream effects on currency valuations, particularly for energy-exporting nations. The current geopolitical climate is introducing volatility that could shift market dynamics beyond typical trading patterns. Per the full note from ing-think, the reinstatement of the blockade is creating uncertainties that traders must navigate.
Recent price movements in oil, particularly a 9.6% rise in Brent crude, are indicative of the heightened tension, with reported disruptions to vessel traffic in the Strait of Hormuz due to military actions. This situation has the potential to maintain upward pressure on oil prices, suggesting that the market is not yet fully factoring in the potential for conflict escalation.
As no internal FX coverage has been noted, this section has been omitted.
The immediate sentiment among firms appears cautious with some alignment on the bullish stance towards oil and its implications for broader economic indicators. Firms like jpmorgan see an oil impact across multiple asset classes, while bofa offers a more conservative outlook, suggesting different approaches to how currency pairs linked to oil prices may respond in the long term.
Given the current landscape, watch the USD/CAD as fluctuations in oil affect this pair directly; similarly, the EUR/USD could see secondary effects from rising energy costs due to inflationary pressures on import bills from countries reliant on energy imports.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
Market implications
Watch for continued volatility in oil prices, particularly if they break above $85 per barrel, as this could signal a broader currency market re-adjustment. Additionally, the impact on the USD/CAD and EUR/USD pairs should be closely analyzed as these currencies are heavily influenced by oil prices.
Risks to this view
Should diplomatic resolutions emerge or if tensions between the US and Iran de-escalate dramatically, we could see a swift reversal in oil price surges, which would negatively impact currencies that have been trading in correlation with oil movements.
Articles The Commodities Feed: Oil surges as US reinstates blockade on Iran Published 02:35 Commodities daily Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Energy prices are surging as tensions between the US and Iran build and vessel traffic through the Strait of Hormuz slows to a trickle Warren Patterson and Ewa Manthey Energy - Trump’s Hormuz toll adds another layer of uncertainty Oil prices surged yesterday, with ICE Brent settling 9.6% higher on the day — back above $83/bbl. This strength has continued into early morning trading today, with little sign of easing tensions between the US and Iran. In fact, we’re seeing the opposite with military strikes continuing, more commercial vessels hit in the Strait of Hormuz, and, importantly, the US reimposing its blockade on Iran.
The return of the US blockade is much more impactful for markets than the previous suspension of the sanction waiver on Iranian oil. The Memorandum of Understanding is starting to look well and truly dead. The consensus says neither side wants an escalation — yet their recent moves tell a different story.
Clearly, oil prices simply aren’t high enough yet to compel Washington to push harder for de‑escalation. The US continues to say that the Strait of Hormuz is open. But given the growing risk of attack, these comments will offer little comfort to ships.
This is reflected in ship tracking data, which shows that vessel crossings yesterday fell to just a trickle. There will likely be additional vessels navigating in the dark given increased hostilities. But clearly, the trend in vessel movements is downward.
The other layer of uncertainty for markets is the cost of navigating the Strait of Hormuz. It's well-telegraphed that Iran is insisting on charging a toll. But President Trump said that the US will charge a fee equivalent to 20% of a cargo's value for providing safe passage for vessels.
There are few details on how this would work—or how serious Trump is about it. A 20% fee on a VLCC that carries 2m barrels at $80/bbl, would be equivalent to around $32m or an additional cost of $16/bbl. This is significantly higher than the $1/bbl toll for which Iran has been pushing.
OPEC's latest monthly market report, out yesterday, showed that the bloc’s production increased by 1.4m b/d month-on-month to 18.2m b/d. Increases were driven by Kuwait and Iraq, which pumped 880k b/d and 446k b/d more, respectively. The UAE, which recently exited OPEC, increased output by 1.64m b/d MoM to 3.8m b/d.
Developments in the Middle East have also seen European natural gas prices surging. TTF settled almost 5.4% higher yesterday, breaking convincingly through EUR50/MWh. The market continues to move higher this morning following the US reimposing a blockade on Iran, generating plenty of uncertainty over LNG flows from the Persian Gulf.
Europe is looking vulnerable heading through the injection season, with storage just 52% full, well below the 5-year average of 68%. JKM’s continued premium to TTF is prompting LNG cargoes to be redirected to Asia, leaving Europe tighter. Metals - Gold sinks as Hormuz risk revives Fed fears Gold fell sharply on Monday, with silver also under pressure, as renewed tensions in the Middle East drove oil prices higher.
This is reinforcing concerns that inflation could remain elevated and keep the Federal Reserve on a tighter policy path. Higher US yields and a stronger dollar continue to weigh on precious metals. Gold remains vulnerable around the $4,000/oz level, with the market closely watching developments around the Strait of Hormuz and their implications for energy prices, inflation and interest rates.
Attention now turns to US inflation data and Fed Chair Kevin Warsh’s testimony before Congress this week. A stronger CPI print or hawkish Fed messaging would add pressure on gold and silver, while any signs that inflation risks are easing, or that the Fed is less inclined to tighten further, could help stabilise prices after the recent sell-off. In base metals, copper found support from tightening LME warehouse dynamics.
Cancelled warrants surged by more than 23kt on Monday — the largest one-day increase since May — after ten consecutive sessions of declines. Most cancellations have been reported in Taiwan, South Korea and Singapore. The move pushed cancelled warrants to around 43% of total LME inventories.
It highlights strong physical demand and continued shipment diversions to the US ahead of the Trump administration's review of copper import tariffs. Meanwhile, on-warrant stocks fell to their lowest level since February, while total LME inventories extended their decline for an 18th consecutive session. Strait of Hormuz Precious metals Persian Gulf OPEC Iran conflict Geopolitics Energy prices Base metals 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 - Trump’s Hormuz toll adds another layer of uncertainty Metals - Gold sinks as Hormuz risk revives Fed fears
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