Hormuz Closure Keeps Oil Prices Volatile, Fed Credibility Concerns Linger

The Strait of Hormuz remains closed, causing oil prices to remain volatile. According to Richard Yetsenga, Group Chief Economist at ANZ Research, the market is struggling to identify fair value due to this binary event.

Oil in the $70s is too low if disruptions persist, while prices above $100 per barrel fail to reflect the political realities, leaving the market caught between two extremes. Yetsenga believes oil around $80 seems more appropriate if the Strait reopens.

He also points out that investors are increasingly focused on the US Federal Reserve's credibility. While inflation is no longer worsening, it remains well above the Fed's 2% target, and he says the market wants to see stronger policy action rather than just reassurance that the inflation goal remains unchanged.