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Oil to still cause volatility even with U.S.-Iran deal in place: Analysts

6 h ago

A tentative U.S.-Iran peace deal has sparked market optimism, but analysts warn that oil-price volatility may persist in the near term. Global oil inventories have declined to low levels due to the prolonged closure of the Strait of Hormuz, and Westpac notes that these inventories will need time to be rebuilt and may fall further before new Gulf supplies arrive. The bank emphasizes that while easing global tensions is welcome, uncertainty remains high due to unresolved details. TD Securities' global head of commodity strategy, Bart Melek, stated on CNBC that even if Strait of Hormuz flows normalize immediately, around 800 million barrels of inventory losses through November will likely pressure the market. He cautioned that higher oil prices and inflationary implications are still "very much in the cards," though massive spikes could be prevented if China halts drawing on its inventories. "The market is quite relieved that we're having a deal, but I think we're not out of the woods yet," Melek added. HSBC Private Bank's Willem Sels noted that the Middle East conflict's economic effects have already impacted the most vulnerable regions, particularly in South Asia. He predicted challenging economic data and mark-to-market volatility. On Monday, Asian markets rallied on risk-on sentiment after the apparent deal to reopen the Strait of Hormuz. International benchmark Brent crude futures for August fell 4.87% to $83.06 a barrel, while U.S. West Texas Intermediate for July dropped 5.71% to $80.03 per barrel. Overall, analysts agree that while the deal provides relief, sustained stability in oil markets remains uncertain.