Running out of patience
The markets are running out of patience on the US reaching a deal with Iran that will reopen the Strait of Hormuz. Talks broke down over the weekend, and it appears that Iran has pulled out of discussion. Trump unilaterally extended the ceasefire agreement, which should have been comforting news for the market, but oil has resumed its climb while yields are inching higher.
As the crisis continues into May, global energy inventories and supply chains may come under further pressure, resulting in non-linear price shocks. We may be crossing the threshold where oil markets need relief from physical barrels and can’t be manipulated lower by Trump’s posts on Truth Social.
Over the past 24 hours, the oil market has undergone a character change where rallies are not getting sold and instead dips are being bought. Brent spiked $5 this morning on reports of air raid alarms and explosions in Tehran. This turned out to be a false alarm, but it’s a signal of how sensitive the upside is to further escalation, and a preview of how the market may react if violence resumes.
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