One can only guess why oil prices dropped relatively sharply while equities, bonds, and the dollar remained comparatively stable yesterday.
The two major driving forces behind investor sentiment have been, and are likely to remain, Russia’s war on Ukraine and the economic reverberations of the tariff war. Of course, the hostilities in Gaza equal, at the very least, the humanitarian tragedy unfolding in Eastern Europe. Yet, for now, there is no immediate threat to oil production, exports, or transport, the pragmatist concludes.
We have long held the view that, for domestic political reasons, namely preventing US retail motor fuel prices from rising and inflationary pressures from re-emerging, the US Administration is unlikely to impose sanctions on Russia. There appeared to be no reason to revise this outlook even after last week’s US–Russia summit, which confirmed that Vladimir Putin’s territorial demands and security concerns, including Ukraine’s potential NATO membership, remain as firm, if not more entrenched, than ever.
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