Iran Deal Weakens Oil Prices!
Oil prices extended their decline after US President Donald Trump said a peace deal with Iran could be signed as early as this weekend. This statement prompted the market to shed some of its geopolitical risk premium, even though Iran emphasized that nothing was final and the deal was still under review.
Brent fell about 2% to below US$87/barrel, while WTI hovered near US$86/barrel. This decline occurred after oil had previously closed at a two-month low. The market considered the chances of a compromise to outweigh the risk of a complete breakdown in negotiations, even though a deal had not yet been confirmed.
Sentiment shifted rapidly after Trump had previously threatened to attack Iran again and seize its oil infrastructure, before later calling off the strike and declaring a deal was close. He also said a signing could take place in Europe over the weekend, with Vice President JD Vance in attendance if the plan materialized.
However, supply risks have not disappeared. The Strait of Hormuz remains a major point of uncertainty after Iran declared the waterway closed to all shipping. A Fox News report reported that US forces shot down two Iranian attack drones suspected of targeting commercial vessels, demonstrating that the risk to energy shipping remains real.
The ongoing war since late February has left Hormuz virtually shut down, disrupting the supply of oil, fuel, and natural gas to the global market. Therefore, although oil prices have fallen on hopes of peace, the market remains cautious, as any new disruptions in Hormuz could quickly re-inflate price pressures.
For now, the direction of oil prices will depend on confirmation from Iran, the safety of ships in the Strait of Hormuz, and whether the agreement is actually signed. If the deal goes through, oil prices could remain depressed. However, if negotiations fail again or attacks continue, energy risk premiums could potentially rise again. (asd)*
Source: Newsmaker.id
