The Strait of Hormuz will remain the keystone of oil prices
Oil prices are back on the rise after Donald Trump’s speech last week, in which he indicated that the bombing of Iran would continue for at least another two to three weeks in the absence of a peace agreement. It is also interesting to note that the equity markets seem, for the moment, to be relatively unaware of these comments, unlike the oil market. The strong negative correlation observed between the two markets since the start of the conflict at the end of February has been interrupted since last week, but this rebound is probably of a “technical” nature after a bearish excess.
There are some reports of a possible agreement between Iran and Oman regarding traffic in the Strait of Hormuz, which they share. That said, the balance of risks continues to tilt in favor of a rise in oil prices. Indeed, unless there is a total resumption of traffic in the Strait of Hormuz, the oil market should remain in deficit. Perhaps it will be a smaller deficit than during the first days of the conflict, but a deficit nonetheless. The international community will therefore have to draw more from its strategic stocks to compensate for this shortfall, otherwise oil prices could continue to rise.
The only real bearish scenario for oil prices would be a peace agreement, accompanied by a complete resumption of traffic in the Strait of Hormuz. At this stage, however, this scenario seems unlikely, given the high demands of both parties. On the one hand, the United States would demand that Iran dismantle all of its existing nuclear capabilities and end its support for its regional relays. On the other hand, Iran would notably request financial compensation, probably worth several billion dollars.
