Oil futures are still pricing in a quick resolution to the Iran war, but analysts warn investors and consumers are likely to be left disappointed.
Prices rose more than 3% at one point early Thursday after the United States and Iran exchanged fresh missile strikes as hostilities in the Middle East appeared to be escalating again. brent crude oilthe international price benchmark was last up 2.1% at $96.29. west texas intermediate After rising 2.4%, futures prices once again exceeded $90 per barrel.
Callum McPherson, head of commodities at Investec, said investors were finding it “incredibly difficult” to understand ongoing price movements, pointing to how constantly changing signals from both Washington and Iran have disrupted markets, with apparent diplomatic developments often contradicted within hours.
McPherson on Wednesday highlighted reports that Iranian officials had discussed a memorandum of understanding that included areas of agreement between the two sides, but that the White House later dismissed the claims as false. Conflicting rhetoric is unfolding in the region alongside new strikes and retaliatory attacks, threatening a fragile ceasefire with collapse.
Mr McPherson said that while the market was “finding a way to survive for the time being”, the current situation was ultimately unsustainable.
Brent crude oil.
“It’s very difficult for the market to know how to react to all of this,” McPherson told CNBC’s “Early Edition of Europe” on Thursday. “There are real consumers, producers and refiners who need to trade, hedge risks and buy cargo. Prices have to be determined.”
“Clear risk premium” for crude oil prices
He said there was evidence that some ships were passing through the Strait of Hormuz, but there were few signs that the vital shipping lane would return to normal. As a result, prices are unlikely to return to the $60-70 per barrel levels seen immediately before the conflict.
“It’s all about having confidence that the war is definitely over and that it won’t break out again,” he added. “The market is coping, but we need a proper resolution relatively soon.”
West Texas Intermediate Futures.
Matt Blitzman, senior equity analyst at Hargreaves Lansdown, said prices in the low to mid-$90s showed there was still a “clear risk premium” in the dispute.
“Right now, the market appears to be caught between short-term nervousness about new adversaries and persistent expectations that both sides still have sufficient incentives to move energy flows,” Blitzman said in a note.
“The big picture is that oil prices are still heading for a second decline in a week, suggesting that investors have not yet priced in the worst of the disruption.”
Sim Moe Xiong, currency strategist at OCBC Group Research, also emphasized that Iran’s ability to disrupt the Strait of Hormuz is a key constraint, warning that oil prices are unlikely to fall too quickly.
“Prices are likely to remain firm due to infrastructure damage, new strategic reserves and rising structural risk premiums.”
