It has been a nine-day — correction, three-day — wonder. The latest fall in prices came to an abrupt halt yesterday, and oil moved north. Of course, betting on continuously higher prices would be foolish, but equally, expecting a prolonged drop below $80 is not a foregone conclusion either.
The reverse correlation between oil prices and stocks/bonds was given yet another kicker overnight with the posting of Nvidia results. The CEO of the tech darling, Jensen Huang, was cock-a-hoop claiming the AI industry had reached a “golden age”, as the chipmaker posted revenue of $96.2 billion for the second quarter, far outstripping the $92 billion Wall Street expectation.
Oil prices fall when supply is abundant and/or demand is scarce. Equities strengthen when economic prospects are sanguine. In light of this economic trivia, it is worth re-citing the US Treasury Secretary. As the US imposed fresh sanctions on Iran on Monday, it targeted digital assets, technology, gold, aviation and shipping—with emphasis on the last one. The cantankerous announcement also carried a warning that a ‘defined timeline’ would be given to Iran’s trading partners to sever ties or risk being ‘cut off from the US financial system’. Yet oil dropped like a stone over two days, stocks strengthened yesterday, and bond yields stabilised.
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