It was never going to be a straight path to peace, and there was a reason why the extended truce between the US and Iran, which is due to expire in the middle of August, has been characterised as tentative, ostensible, or fragile. Although the Strait reopened and trade flows resumed, there has been no progress in negotiations aimed at denuclearising Iran in return for, among other concessions, the unfreezing of Iranian funds held abroad.
There was a particularly convincing and well written investigative piece in Petroleum Intelligence Weekly last week. It is something we not only admire but wished we had authored. Entitled ‘How Oil Markets Took Hormuz Crisis in Stride’, it picks apart the assumption most of our fraternity, including us, expected that closing the most important sea passage for oil communication would result in oil prices making record highs.
The script did not change last week. Equities remained resilient, but oil investors were wary. Although the AI sector wobbled occasionally, the South Korean equity index staged a robust rebound on Friday. The eagerly awaited US jobs report showed an increase of just 57,000 jobs in June, well below expectations. When disappointing labour market data are coupled with lower inflation expectations driven by cheaper energy, monetary luminaries will think twice or even thrice before contemplating an increase in the cost of borrowing.
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