The oil market continues to signal a rising chance of US military intervention in Iran.
Oil had been bouncing around in a range of $62-$66 as headlines around Iran shifted the narrative but today crude broke out. It’s up $1.34 to $66.53 and has simultaneously broke above the October high.
Oil briefly bounced around today when Trump was asked about Iran. The first headlines were that ‘goods talks were being had with Iran’ and that the US had to make a meaningful deal with Iran. However he added that they needed to make a deal “or something very bad will happen”.
Trump also put a timeline on action, saying the US will find out “about 10 days”. That suggests Iran is facing some sort of ultimatum. Today Russia said it could accept Iran’s enriched uranium.
Yesterday, I highlighted reports from Israeli media saying they were being told to be ready for war imminently. There is also a WSJ report today emphasizing the military buildup in the Middle East. It says the US has gathered the most air power in the Mideast since the 2003 Iraq invasion.
Bloomberg’s Javier Blas today spoke with Energy Secretary Chris Wright who dismissed worries about oil prices. Blas writes:
If the Islamic Republic feels its survival is at stake, the regional energy industry could become a target…or weeks, Iranian officials have been telegraphing, including via military drills, that oil would be a central part of their response to any attack.
Iran pumps nearly 5 million barrels per day with about half exported. Losing that would erase any surpluses in the global market and more. However the long history of the market worrying about Middle East wars boosting oil prices shows a consistent pattern: Buy the rumor, sell the fact.
Time will tell but right now there is some momentum to the upside, despite the 10-day wait
