The Commodities Feed: US-Iran ceasefire breakdown pushes oil higher
The breakdown of the US-Iran ceasefire has reignited tensions in the Middle East, driving oil prices higher as geopolitical risks resurface. Per the full note from ing-think, fresh US strikes against Iranian interests, combined with a Russian ban on diesel exports, have contributed to upward pressure on oil prices, which settled at $78/bbl, a 5.2% increase. This renewed volatility emphasizes the fragile nature of the recent ceasefire, suggesting that the oil market was overly optimistic about regional stability. Institutional traders should monitor whether tanker crossings in the Strait of Hormuz rebound in the wake of the escalating tensions, as this will provide insight into supply dynamics moving forward.
What the desk is arguing
The escalation of military actions between the US and Iran has dramatically altered the outlook for oil prices, as renewed conflict casts doubt on the durability of ceasefires in the region. Per the full note from ing-think, oil prices have been buoyed not just by geopolitical tensions but also by supply constraints linked to Russian diesel export bans, which will further strain availability.
Notably, the daily average of tanker crossings through the Strait of Hormuz fell to just seven on a recent day, markedly lower than the average of eighteen earlier in July, which indicates a potential risk to crude supply lines. This trend could foreshadow sustained upward pressure on oil prices as supply fears mount alongside geopolitical nightmares.
Where it sits in our coverage
Given the lack of internal coverage data on relevant currency pairs, this section may not apply directly. However, it is vital to note how these geopolitical developments could cascade into broader FX market volatility.
How other firms see it
While some firms are likely hedging against the risk of higher oil prices, particularly those with vested interests, others may be positioned contrary, believing the tensions will prompt a swift resolution. Firms like jpmorgan and bofa might be forecasting differing price paths based on their geopolitical assumptions. The divergence in outlook reflects varying confidence levels regarding price traction in energy markets.
What the calendar says
No high-impact events are currently on the calendar that could serve as direct catalysts for this evolving narrative, thus, traders should focus on real-time developments regarding US-Iran relations and observable market reactions.
Key takeaways
- 01Renewed US-Iran tensions are driving oil prices higher, with prices rising 5.2% to over $78/bbl.
- 02Tanker crossings in the Strait of Hormuz plummeted to the lowest level since late June, indicating concerns about supply logistics.
- 03The potential for retaliatory actions from Iran could further disrupt oil supply routes.
- 04Russia's ban on diesel exports adds another layer of complexity to already strained global oil markets.
Market implications
Traders should watch for any upward momentum that could push Brent crude towards the $80/bbl level, as geopolitical risks are inherently volatile. A rebound in tanker crossings could signal a return to normalcy or indicate sustained underlying concerns over supply routes.
Risks to this view
A de-escalation of tensions between the US and Iran, or a swift diplomatic resolution could sharply reverse the current bullish sentiment in the oil market, potentially driving prices lower. Additionally, any significant increase in tankers navigating the Strait of Hormuz could alleviate some supply fears.
Articles The Commodities Feed: US-Iran ceasefire breakdown pushes oil higher 02:01 Commodities daily Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Fresh US strikes on Iran pushed oil higher this morning, with the latest escalation undermining confidence in the fragile ceasefire. Russia's ban on the export of diesel until the end of July adds to supply concerns Warren Patterson and Ewa Manthey Energy – Russia bans diesel exports The oil market has continued to rally as the ceasefire between the US and Iran appears to be on life support. ICE Brent settled 5.2% higher yesterday at a little over $78/bbl, with further upside expected today following additional US strikes against Iran in response to its earlier attacks on several vessels navigating the Strait of Hormuz.
President Trump said he considers the ceasefire with Iran to be over, while also threatening to reimpose a blockade on Iranian ports. This would be more impactful for oil markets than the recent revocation of a sanction waiver on Iranian oil. Iran has vowed to respond to these recent strikes, with reports that US military bases in the region will be targeted.
Key for the oil outlook is whether the US and Iran are able to quickly de-escalate this latest rise in tensions. The past few days’ price action makes one thing clear: markets were far too relaxed about the risks surrounding the deal — and far too bullish on how quickly regional supply could rebound. Vessel tracking data shows that Strait of Hormuz tanker crossings declined to just 7 yesterday, the lowest level since 21 June.
This compares to a daily average of 18 over the first seven days of July. This data will not pick up tankers navigating the strait with their transponders turned off. The market will be watching whether these crossings rebound in the coming days — or whether rising tensions keep shipowners wary of navigating this critical energy choke point.
Adding to supply concerns in the oil market, and specifically in middle distillates, Russia announced a ban on the export of diesel until the end of July. This comes amid fuel shortages in the country following continued Ukrainian drone attacks on Russian refinery infrastructure. There has been plenty of noise in recent weeks that Russia was considering a ban, so this shouldn’t come as too much of a surprise.
However, the front-month ICE gasoil contract still surged almost 13% yesterday, while the crack is now trading above $60/bbl. Russia is the globe’s second largest diesel exporter. So, this move is significant for the market, although Russian diesel exports have come under significant pressure already due to the Ukrainian attacks.
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