In yesterday’s note, we contemplated a gradual price decrease below $70/bbl if oil output and traffic in the Middle East is not disrupted as a result of the weekend’s US attack on Iranian nuclear facilities. How wrong we were proven. Oil investors delivered a brutal verdict and after a very brief deliberation, they sentenced reluctant bulls to a daily loss of more than $5/bbl.
Last week was characterized by ambiguity as investors desperately tried to evaluate the likelihood and the possible timing of a direct US involvement in the Israel-Iran conflict after the Jewish state launched its first attacks on its arch-enemy on June 13. The rhetoric of the White House was not helpful and was even confusing and contradictory. Oil prices strengthened most of the week as fears of significant supply disruption rose. The negative economic impact of US strikes on Iran was mirrored in a sell-off in equities.
When the White House press secretary Karoline Leavitt stepped up to the podium yesterday to announce “President Trump thinks there’s a substantial chance of negotiations that may or may not take place with Iran in the near future”, going on to say that any decision on whether the US will carry out a military strike on Iran will be considered over the next two weeks, the derision and cries of TACO (Trump always chickens out) are heard from Washington to a disappointed Tel Aviv.
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