Key insights
- Geopolitical tensions have resurfaced in the Middle East, with CENTCOM striking Iran, causing oil prices to surge. This reverses recent optimism about a potential US-Iran deal that had previously pushed oil lower. The market is now volatile, swinging between de-escalation and escalation narratives, with oil prices driven more by uncertainty than fundamentals. This suggests potential headwinds for energy-dependent sectors and inflationary pressures if the conflict escalates further.
Vance's comments on May 28 fueled optimism around a potential US-Iran deal, helping push oil lower as traders priced in de-escalation and a possible reopening of Hormuz. But renewed military action and uncertainty around negotiations have since reversed part of that move. Brent is back around $95 and WTI near $92 after a sharp rebound from last week's lows. The market keeps swinging between "deal incoming" and "conflict escalating" narratives, and that uncertainty is now driving oil more than fundamentals.
The question isn't whether oil is going to be volatile. It's whether your energy allocation accounts for the possibility that this conflict escalates further before any real deal materializes. Because right now the market is pricing a ceasefire that doesn't exist