Deutsche Bank strategists highlight that Brent Oil has reversed recent gains as hopes grow for a US-Iran deal, easing stagflation concerns and pulling inflation expectations lower. They note declines in both spot and 6‑month Brent futures alongside softer US and Euro inflation swaps. This backdrop has reduced perceived risks of a prolonged conflict and supported a more dovish central bank path.

Brent slide tempers inflation concerns

"Oil prices did rebound a bit during the US session as Lebanon’s Hezbollah militia rejected the US-brokered ceasefire, but overall this didn’t derail the more optimistic mood following the ceasefire announcement by Israel and the Lebanese government the previous evening."

"And investors also priced out the chance of a longer conflict, with the 6-month Brent future (-2.15%) also falling to $85.04/bbl."

"So that helped to ease concerns about inflation, with the 1yr US inflation swap (-9.2bps) falling to 3.09%, whilst the 1yr Euro inflation swap (-5.5bps) fell to 2.99%."

"Before these overnight moves, markets stabilised yesterday amidst growing hopes for some sort of US-Iran deal. So Brent crude oil prices (-2.84%) fell back to $95.03/bbl, reversing course after three consecutive gains, which in turn helped to ease fears about a stagflationary shock."

"In terms of the latest from the Middle East, there wasn’t much in the way of fresh news. However, oil prices saw a clear move lower after Trump issued a post criticising the vote in the House of Representatives against the Iran conflict."

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