Teheran's unprecedented missile and drone attack on Israel has so far triggered a muted market response on Monday. As Israel weighs its options in the aftermath of the assault, hopes that the conflict would remain contained prevail due to limited damage and no life loss. Secondly, some escalation had been widely expected, and risk aversion rose sharply on Friday.
Brent Oil prices retreated after briefly trading above the USD 92 mark on Friday. US equity futures are rising after slipping ahead of the weekend. The US Dollar Index remains close to the multi-month highs set last week as safe-haven demand surged and inflation figures surprised to the upside limiting the chances for a Fed June cut. Gold prices advance by ca. 0.5 pct and are within touching distance of recent all-time highs.
The situation remains fluid, however, and the geopolitical risk premium is set to remain elevated. Israel's government's potential response is still extremely uncertain. The stakes are high. Significant retaliation could lead to a wider conflict, consequently triggering a rally in oil prices, robust demand for the US dollar, and renewed buying of gold.
The assault should have the most lasting effect on the oil market as it directly threatens the regional supply. The market has already been broadly balanced in the first part of the year. The risk of flipping to undersupply is clearly on the rise. Iranian crude extraction amounts to almost 3.5 million barrels daily, accounting for roughly 3.3 pct of global production. A tougher stance on Iran and stricter enforcement of previous sanctions should be expected. A possible Iranian blockade of the Strait of Hormuz, the world's most important oil chokepoint, could also be on the cards. Fintech Conotoxia expects Brent prices to remain above 84 USD/bbl in the remainder of the year and may rally to over USD 100 in the event of an open war.
This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without acknowledgement of the source is prohibited.
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12 Apr 2024 12:00
Swedish inflation figures seal the deal for a May rate cut
Teheran's unprecedented missile and drone attack on Israel has so far triggered a muted market response on Monday. As Israel weighs its options in the aftermath of the assault, hopes that the conflict would remain contained prevail due to limited damage and no life loss. Secondly, some escalation had been widely expected, and risk aversion rose sharply on Friday.
Brent Oil prices retreated after briefly trading above the USD 92 mark on Friday. US equity futures are rising after slipping ahead of the weekend. The US Dollar Index remains close to the multi-month highs set last week as safe-haven demand surged and inflation figures surprised to the upside limiting the chances for a Fed June cut. Gold prices advance by ca. 0.5 pct and are within touching distance of recent all-time highs.
The situation remains fluid, however, and the geopolitical risk premium is set to remain elevated. Israel's government's potential response is still extremely uncertain. The stakes are high. Significant retaliation could lead to a wider conflict, consequently triggering a rally in oil prices, robust demand for the US dollar, and renewed buying of gold.
The assault should have the most lasting effect on the oil market as it directly threatens the regional supply. The market has already been broadly balanced in the first part of the year. The risk of flipping to undersupply is clearly on the rise. Iranian crude extraction amounts to almost 3.5 million barrels daily, accounting for roughly 3.3 pct of global production. A tougher stance on Iran and stricter enforcement of previous sanctions should be expected. A possible Iranian blockade of the Strait of Hormuz, the world's most important oil chokepoint, could also be on the cards. Fintech Conotoxia expects Brent prices to remain above 84 USD/bbl in the remainder of the year and may rally to over USD 100 in the event of an open war.
See also:
Swedish inflation figures seal the deal for a May rate cut
Norway’s inflation continues to surprise to the downside
The SEK moves lower as May rate cut remains on the table
The Hungarian central bank decelerates rate cuts having forint in mind
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