Analysts are cautioning that while the recent U.S.-Iran peace deal has led to a temporary drop in oil prices, significant volatility may persist in the oil market. Westpac noted that global oil inventories are at low levels, primarily due to the prolonged closure of the Strait of Hormuz, and will require time to rebuild.
Bart Melek from TD Securities highlighted that even if oil flows from the Strait normalize, approximately 800 million barrels of inventories could be lost by November, potentially exerting upward pressure on prices. He also indicated that higher oil prices could contribute to inflationary pressures, although significant spikes might be mitigated if China halts its inventory drawdown.
Willem Sels from HSBC pointed out that the economic repercussions of the Middle East conflict are already affecting vulnerable economies, particularly in South Asia, which could lead to increased market volatility. On the trading front, Brent crude futures fell 4.87% to $83.06 per barrel, while U.S.
West Texas Intermediate futures dropped 5.71% to $80.03 per barrel, reflecting a risk-on sentiment in Asian markets following the news of the potential deal