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Rabobank’s RaboResearch Global Economics & Markets team highlights that Oil prices are not fully reflecting escalating risks around the Strait of Hormuz, despite ongoing Iranian attacks on Gulf energy infrastructure and US strikes. The report stresses that Oil flows depend on how the Middle East war ends and notes potential IEA strategic reserve releases that may temporarily ease market pressure.
Hormuz risks and strategic reserves interplay
“Iran continued to attack the Gulf states’ energy infrastructure and claimed “not a single litre” of oil will exit until the US and Israel retreat. It’s reportedly activating minelayers and speedboats in the Strait, as the US claimed it’s destroyed 16 of the former. However, that critical waterway is still absent US, GCC, or European minesweepers or corvettes, without which getting oil out is unlikely absent a peace deal or a US/Israel defeat.”
“Indeed, despite ‘peace now’ market oil pricing, yesterday saw the heaviest US attacks so far. The Israeli defence press speak of the US stepping things up for the next 1-2 weeks, already an additional week to what analysts had hoped for after the Trump statement on Monday. Other press add that some in the Israeli government think it could take up to a year for the Iranian regime to finally fall – that’s a military timetable which is impossible for the US and Israel to stick to both politically and logistically.”
“Positively, the Wall Street Journal claims the IEA will today propose its largest ever oil release from strategic reserves, moving beyond just promised action from the G7. Again, that will help buy some time. Yet in doing so, that takes the immediate market pressure off the US and Israel to wrap up the war quickly… and does it also give China more leverage over rare earths vs any implied US oil threat (then implying that things would need to escalate more)?”
“Meanwhile, even as markets price an (ambiguous) positive endgame to this Middle East war via stable oil prices around current (higher) levels, that doesn’t account for the dichotomy between the financial (i.e., prices on screens) and the material (i.e., actual availability of energy and key derivatives such as sulphur, fertilisers, and helium).”
