Brent oil prices declined on Wednesday morning, trading just above the $100 mark at the start of European trading. A shift in sentiment has occurred in financial markets. The US dollar and energy prices, which had risen in March and remained at high levels, gave back some of their gains after the US government signaled on Tuesday that it might be considering withdrawing from the war against Iran.
This prospect brought joy to traders, boosted risk appetite, and led to gains in stock indices and all major currencies against the US dollar.
However, the underlying conditions have not changed for now. The Strait of Hormuz remains practically blocked, and it is unclear how shipping traffic in the Persian Gulf could normalize, even in a scenario where the US withdraws from the region. Another important aspect is that even the most optimistic scenario entails a sustained disruption of oil and gas supplies from the Middle East due to bottlenecks and reduced production capacity.
Against this backdrop, it is possible that the optimism observed on Tuesday could give way to a more realistic assessment, which could nevertheless lead to further gains in oil prices.
Ricardo Evangelista – Senior Analyst, ActivTrades
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