Daily update
Daily update
- Throughout the war, markets have been inclined to see the oil barrel as half full rather than half empty. Thus, markets are inclined to view the ceasefire as a definite end to the conflict. Iran’s low level of trust in the US administration’s commitment to agreements means examining the motives for the shift is important.
- If domestic politics drove the US change, this might signal a more enduring settlement. The affordability crisis was made worse by gasoline over USD 4 per US gallon. Domestic support for the war was low. Republicans suffered a sizable defeat in the Wisconsin supreme court election (a swing state).
- Iran intends to toll traffic through the Strait of Hormuz. The numbers imply around a dollar a barrel being added to oil costs via that route, which is economically negligible. What matters is where that money is spent (almost certainly not the US). That flow of funds is also important when considering reconstruction and rearmament in the Gulf region—presumably funded by oil revenues and maybe sovereign wealth funds. If the region is now less inclined to buy US, petrodollars will be converted.
- The war has triggered structural shifts—a further boost to renewable energy, possible investment in alternative routes to Hormuz, rethinking the focus of defense spending.