So much for the two week wait. Financial markets are still trying to make heads or tails of the US strike carried out against Iranian nuclear facilities over the weekend. The reaction so far has been relatively muted, even in oil markets. Crude prices have risen a modest 2% in the wake of the attack, pushing Brent futures up to $78 a barrel and WTI above $75. The obvious question however is what happens next. Should the regime retaliate and cause disruptions in the Strait of Hormuz, there will be immediate consequences on crude oil delivery and pricing, but for now oil markets are betting that the situation will not escalate any further. The strait currently accounts for a quarter of all seaborn oil trade. Underscoring all of the above, there is still a fundamental market structure that is keeping a lid on prices. The fact remains that global inventories are high, oil producing nations are largely holding back on production and worldwide demand forecasts are nothing to write home about.
For all the commotion on the international stage, gold has had very little to say for itself. A high opening this morning was quickly abandoned and the precious metal is currently down to $3,370 an ounce at the time of writing. Silver and platinum are not seeing any particular inflows either. The Dollar on the other hand has taken up a stronger position this morning, pushing the DXY back above 99 and putting major currencies on the back foot. US stock market futures are predictably down, although only marginally. Cryptocurrencies have been hit the hardest, with Bitcoin briefly dipping below $100k last night and barely holding onto it this morning.
Developments in the Middle East will likely be the main driver over the next few sessions, in what is set to be a relatively light week in terms of economic data. Later today, manufacturing and services PMIs will provide the latest insights into the European and US economies. The mid-week has little to offer other than Jerome Powell’s latest testimony before the US Congress. The most notable event of the week will have to wait until Friday in the form of last month’s PCE price report. Until then, all eyes on Iran.
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