Oil: Conflict risks and Strait disruption – Rabobank

Rabobank strategist Molly Schwartz highlights that European Union (EU) and Gulf Cooperation Council (GCC) officials see a potential US–Iran deal taking up to six months, which pushed Crude Oil futures back to around $98/bbl. She report stresses that every day the Strait of Hormuz remains closed weighs on GCC economies and that Europe is preparing a post-conflict plan to secure shipping and free the Strait.

Strait closure and Iran deal timeline

"While many anxiously monitor the situation to see how long this 10-day ceasefire might last, EU and GCC officials have predicted that a deal between the US and Iran may take close to 6 months as counterparties argue back and forth on the subject of enriching uranium and developing nuclear capabilities. Crude oil futures traders did not like this proposed timeline and crude climbed by more than $3 higher on the day, back to $98/bbl."

"Every day the Strait of Hormuz remains closed puts further weight on GCC economies."

"Europe is also putting forward a plan to free the Strait of Hormuz, but without the involvement of what French President Macron has called, “belligerent parties”—a term the WSJ notes refers to “the US, Israel and Iran.” Notably, the proposal is expressly intended to take effect only after “hostilities have ceased.”"

"Unfortunately, a plan for after the war is over does not solve the problems facing shipping companies today. Bloomberg reports that “the standoff between charterers and shipowners means that barely any agreements are being reach to load oil inside the Persian Gulf, with vessel-hire costs including a risk premium of about $475,000 a day.”"

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)