Brent: Cautious trade with geopolitical risks – Rabobank

Rabobank’s Bas van Geffen notes that talks on reopening Hormuz are progressing slowly, with Iran adding new conditions on the United States (US), keeping geopolitical risk elevated for Oil. He highlights that Brent futures started the week only marginally higher as traders avoid large positions given on‑again, off‑again headlines around Iran, the US and regional tensions.

Hormuz tensions keep Oil risk premium

"Talks between Iran and Oman on the reopening of Hormuz are reportedly inching ahead, as Iran continues to give the US the silent treatment. Negotiators said that a deal to establish a safe shipping route was close, but Iran may now be exploring just how much it can extract from the US in return."

"But give them an inch and they’ll take a mile. Tehran added new demands over the weekend, saying that the Strait of Hormuz will not reopen unless the US meets “a number of requirements.” These demands largely seem to refer to the original memorandum of understanding."

"Iran’s additional demands include the US ending all hostilities and withdrawing its troops from the area. Iran also wants Washington to pay billions in war damages and lift sanctions on the country."

"Or do the additional demands reflect division between Iranian camps, and varying levels of distrust of the US? The strait remains a key point of geopolitical leverage – at least until planned alternatives for oil exports are all fully operational."

"Energy markets started the week off cautiously after all this. Brent futures are marginally higher, but traders seem reluctant to take big positions given all this on-again, off-again news."

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