Hormuz Tensions Keep Oil Prices on High Alert

Rabobank's Senior Market Strategist Benjamin Picton notes that recurring Middle East tensions around the Strait of Hormuz are keeping oil prices in focus. This 'Hormuz Groundhog Day' has become a familiar pattern, where strikes on Iran are halted and Brent crude prices fall, only to resume later in the week.

However, the market is bracing for the possibility that strikes will indeed resume, sending oil prices higher, equities lower, and bond yields up. So far, large draws in global inventories have been met with minimal price increases, but Picton warns of a potential supply response from US producers.

The physical realities of war are already having an impact on the market, with Singapore gasoil spot prices sitting more than two standard deviations above the long-run spread to Brent. This could contribute to a structural reshuffling of the energy deck once the current crisis is over.