Market 'Pricing Adaptability' Over Worst-Case Iran Scenario
The Iran conflict continues to cast a shadow over global oil markets, but crude futures are not pricing in the worst-case scenario.
Instead of factoring in the risks of a prolonged disruption to Middle East crude supplies, market participants seem to be betting on adaptability.
This is evident from the recent price movements in Brent futures. Despite a brief ceasefire in mid-June, which saw prices surge by 45% to $102.00, the high reached was well below the peak of $139.13 set after Russia invaded Ukraine in February 2022.
The Strait of Hormuz remains contested, and shipping volumes through this narrow waterway have collapsed since the collapse of the US-Iran deal. The alternative route for Saudi oil to Asia via the Suez Canal is more complex and costly, but it's still possible.