MUFG’s Lee Hardman highlights that Oil prices have fallen back toward USD80 per barrel as markets anticipate normalized flows through the Strait of Hormuz after the US-Iran agreement. However, he argues that Oil is unlikely to return below USD70 because supply restoration will take time, inventories are depleted and a higher geopolitical risk premium is likely to persist.

Energy markets price conflict de-escalation

"The price of oil has continued to drop back towards USD80/barrel overnight reflecting building investor optimism that energy supplies will soon begin to normalize."

"However, we doubt it will return to pre-conflict levels below USD70/barrel given it will take time for supplies to come back on stream, inventories have been run down and a larger geopolitical risk premium will still be required to reflect the ongoing risk of the deal breaking down."

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