The recent end of the always-fragile ceasefire with Iran throws energy markets, oil in particular, back into the forefront of investors’ minds, just when they were getting used to a $60 price handle again.
It’s a dynamic situation, and while near-term traders enjoy it, longer-term investors need to take a more reflective view
Here are the bullish and bearish views on the matter. The oil bulls’ argument President Trump couldn’t have been any clearer on his recent Truth Social post: The Islamic Republic of Iran has asked us to continue ‘talks.’ We have agreed to do so, but the United States has stated to them, in no uncertain terms, that the Cease Fire is OVER! These statements support bullish arguments for oil, which have at least three parts.
First, oil remains susceptible to shocks. These include “known unknowns,” such as Iran using the closure of the Strait to gain leverage in any conflict, and the potential for “unknown unknowns” that always overhang a commodity often produced in unstable parts of the world. Given that Iran has demonstrated political leverage in closing the Strait and no long-term resolution to the underlying conflict is in place, it wouldn’t be surprising to see more of the same in the future.