Although there seemed a consensus on how the Bank of Japan would need react in this uncertain world, nonetheless, the raising of interest rates by 25-basis points to a full 1 percent, is the highest for 31 years. The move is to counter the current upcycle in inflation which had been dead and buried for over 2 decades, and oddly, its return has been something longed for by all manner of commentators and policy makers alike, because the economy was in dire need of an antidote to the haunting stagflation. However, inflationary growth is one thing, surging prices due to higher costs of imported commodities is another. Welcome then to the spreading influence of the Iranian war. The inching forward of interest rates serves the Japanese Yen well. The currency has been on the backfoot for an inordinate amount of time and its undervalue might been a boon for exporters, but completely the reverse for importers. Giving the Yen some pep against its currency pairs, particularly the US Dollar, is not only stabilising for national assets but also allows for more buying power when Japanese companies come to market for high-cost goods such as energy. The current Prime Minister, Sanae Takaichi, has been quiet so far on the BoJ decision, but her ability to continue in policies that are monetarily-loose has just been giving something of a blow. Whether or not this nonsensical war around the Arabian Gulf is over remains to be seen, but its influence is not just on how central bankers need be defensive, it is how the policies of energy importing countries are affected. Repetition elsewhere is more than likely.

A MoU to you too

Right, let us get things straight. This is a memorandum of understanding we are all talking about. It is an agreement to agree to discussing a further agreement on how this war will end. Is that now clear to you? Are you completely cognisant of all the facts and the diplomatic vagaries that are likely to ensue in the following 60 days, if, this MoU makes it to formal signature on Friday as advertised in the popular press and not so popular ‘Truth Social’? Well, thank goodness you are, because we here lack the intellectual amplitude to navigate this morass of words and insipid duplicity. Maybe we should just all be thankful to the US President for possibly opening the Strait of Hormuz, oh, but wait a minute, was it not fully and freely open before?

No apologies are offered for the opening frustration. It is not us or our fraternity on whose behalf we try to write that are cynical, it is the President of the United States who lays burden with this charge along with his warmongering mate in Israel. Iran is an evil regime; it has been for decades but now enjoys the mantle of being the underdog, experiencing wrongdoing. It has adopted a siege mentality and has grown in confidence in how it may resist the ‘great Satan’ by using its Hormuz superpower and skills in unmanned aerial vehicles when exacting nuisance revenge on neighbours and direct foes alike. It is beyond credence to believe Iran will give up its nuclear treasures; in whatever guise they may be. Yet this so-called “red line” of Donald Trump is sacrificed at the altar of convenience in order to get this MoU to at least first base. If Iran’s uranium stockpile, its processing and technology are deal-busters in the future, they should be deal-busters now. The US President, despite his feigned flippancy, is desperate for this off-ramp which is nothing more than buying time. This whole “excursion” as his won’t to call, is an unmitigated disaster, and dress it up with a bright and shiny MoU and appeasing language as one might, this is not the end of this chapter in the ‘Arabian Nights’.

The one glaring success of Trump is how he has broken the oil market in its trading confidence. Coincidence, happenstance and good fortune should be allowed for in consideration, but the incessant headline attack from Washington has secured a humbling of all that that makes for logic and turned oil trading into a game of pure chance. Recently, missiles and bombs dropped by the marauding USAF had hardly touched Iranian earth before another headline proclaiming a deal was near at hand wandered across newsfeeds. Those within our market have thus spent the last 3 months second-guessing their second-guesses. And those that are not required to be involved in oil and are investment volunteers, upped sticks and left ages ago for more lucrative and brighter climes. 

Open Interest is always a tenuous argument, it is as much art as science, but there is no doubt of evacuation. Total O.I. at the start of the war was 3.3 million lots in Brent, it is now 2.6 million. When August 2026 topped the Brent futures board after July had expired, its 530k lots of Open Interest was over 100k lower than any other month since the beginning of the year. Oil prices have been tamed; they have not been cured. There is not a headline that washes over how the world has lost over a billion barrels of molecules or that all nations who embarked on releasing reserves to soothe oil price anxiety will have to at some point engage on refilling those lost barrels and such competition will establish a firm bid, and speculatively, probably not that far from here. 

The oil market and its prices are stuck between manipulative rhetoric and impending reality, and confidence is at an all-time low. Our market will only breakout of this malignant reverie when there is a visceral end to the US/Israel and Iranian war or at such time when these confines are unable to hold it. Until then, we, in unison with our brothers and sisters, pronounce how MoU should be spoken and give it a great big ‘moo'.

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