Rabobank’s Senior Market Strategist Benjamin Picton highlights how shifting perceptions around the Strait of Hormuz are driving sharp moves in Brent. He notes Brent crude’s more than 9% drop on Friday to $90.38/bbl and a 7% gap higher on Monday as markets reprice geopolitical risk and the reduced likelihood of a durable ceasefire.

Oil swings with Hormuz uncertainty

"On Friday Iranian Foreign Minister Araghchi posted on X that the Strait was “completely open” to all commercial vessels for the duration of the 10-day ceasefire between Israel and Lebanon. Markets reacted swiftly, the S&P500 rose 1.20% to close at a new all-time high and the Brent crude front future fell more than 9% to settle at $90.38/bbl – its lowest weekly close since the war began."

"Even dated Brent (the physical oil price for immediate delivery) fell by more than 15% to $98.95/bbl – its lowest level since March 11th, which was the immediate aftermath of Trump’s comment that the war in Iran is “very complete”."

"Unsurprisingly, markets this morning are once again repricing the status of the Strait and the diminished prospect for a peace agreement ahead of the expected expiry of the US-Iran ceasefire on Wednesday. Brent crude has opened 7% higher, high beta FX is being sold sharply, and US equity futures are pointing to losses of ~0.8% at market open."

"So, while we have Schrodinger’s Strait we also have Schrodinger’s market where we are simultaneously in the grip of the largest energy shock in history (according to the IEA) with physical shortages of loads of things needed for 21st century life, but this is also incredibly bullish and stock indices remain close to all-time highs."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)