Just when you thought that a normalisation of the crude market was on the horizon, Brent futures had fallen to pre-War pricing levels, and oil glut chatter resurfaced - disruption came glaring back. Versus last week, both Brent and WTI are up by double-digits. That is to be expected when a key maritime artery through which a fifth of the world's oil and LNG transit remains severely disrupted.
When Iran initially started attacking ships and tankers transiting through the Strait of Hormuz (again) a fortnight ago for using the southern Hormuz corridor in Oman's territorial waters versus its own northern corridor, the idea was perhaps to see what the US response would be, re-assert its authority, and more generally poke Trump as it was.
Not sure what the Iranians were expecting, other than what's since happened - a overwhelming show of force by US, a reimposition of a blockade on Iranian oil and more turmoil. The big question for the market is not where we are currently at, but rather where is this is going?
A prolonged disruption can now only lead to one outcome - a diminished importance of the Strait of Hormuz over the medium-term with the rest of the region contemplating alternative pipeline routes, having taken a cue from the UAE and Saudi Arabia.
And for the moment, we'll continue to see elevated - but not out of control - oil prices as the true cost of this latest costly miscalculation is counted. That's all for the moment folks! More market musings to follow soon. Keep reading, keep it here, keep it 'crude'!
