Rabobank's Senior Market Strategist Benjamin Picton notes that Brent and WTI have reacted only modestly to renewed United States (US)-Iran tensions, with Brent holding near $105 and WTI below $100. Picton highlights the Strait of Hormuz being functionally closed and stresses that US control over global energy supply chains allows it to pressure China via Oil flows, impacting Chinese industrial conditions.

Energy markets under war pressure

"“On massive life support” was Donald Trump’s characterisation of the US-Iran ceasefire yesterday. This followed Sunday’s rejection of Iranian terms for peace that Trump described as “totally unacceptable”. In a boy-who-cried-wolf-style sign of growing market insensitivity to Presidential prognostications, Brent was only up 2.88% to $104.21/bbl and WTI crude remains below $100/bbl."

"Of course, while all this is going on the Strait of Hormuz remains functionally closed and world fertiliser and energy markets are treading air like Wile-e-Coyote run off the cliff."

"This perhaps overstates the weakness of Trump’s position by ignoring the fact that the US has tightened its grip on global energy supply chains and has shown that is has the power to put its foot on the hosepipe of Chinese energy imports whenever it likes."

"In the flurry of commentary over China’s bumper trade surplus in April, it seems to have been missed that import volumes for crude oil were down sharply, but values were higher."

"Yesterday’s April PPI figures for China also underscored the uncomfortable effects that the Iran war is having on the Chinese industrial economy."

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