Brent and WTI crude oil were both firmer in early trade this morning, and on course for their third successive day of gains. Yesterday, front-month Brent pushed up towards $101 per barrel before pulling back. This morning, it once again breached the $100 level. Front-month WTI approached $97 to hit a 10-day high.
Source: TN Trader
Crude oil has rallied despite the indefinite extension of the US/Iran ceasefire deadline. And in this, it is perhaps expressing an opposite interpretation of the move from investors in US equities. It’s worth bearing in mind that the deadline extension was made unilaterally by President Trump.
He stated that he was giving Tehran a longer opportunity to come to the negotiating table as US military action had ‘fractured’ Iran’s leadership structure. This would be viewed as quite an insult in Tehran, whose war is effectively existential.
Whatever is left of Iran’s leadership has made it perfectly clear that it will not negotiate while US forces continue to blockade its ports around the Strait of Hormuz. Whether the regime can hold out against this blockade for longer than the world can survive the closure of the Strait of Hormuz is now crucial.
As noted earlier, Iran’s capacity to absorb economic pain is far greater than that of the US, or Europe, for that matter. But it would take significant pressure from countries such as China and India to persuade Tehran to return to negotiations, let alone reopen the Strait of Hormuz.
