- Brent and crude oil prices have fallen nearly 20% in a month after a ceasefire and the reopening of the Strait of Hormuz.
- The US-Iran peace deal remains a major market risk, with negotiations extended beyond the imagined timeline.
- A final deal is still in the making as both sides remain in disagreement, keeping global markets on edge.
Brent and crude oil prices have slumped almost 20% over the past month following a ceasefire announcement and the reopening of the Strait of Hormuz, but the market’s focus has shifted to the fragile US-Iran peace deal. This uncertainty is causing volatility across broader markets, even as oil prices tumble toward the $70 level.
Leaders from both sides are prone to delivering blitzkrieg statements if negotiations don’t go their way. This has kept global markets on their toes, as the flipside remains a costly affair. Ryan Sweet, the Oxford Economics Chief Global Economist, stated that until a peace deal is finalized, the stock market will remain volatile.
“A peace deal that holds would produce a cascade of easing conditions: energy disinflation, central bank optionality, looser financial market conditions and relief for emerging markets,” Sweet wrote to clients on Monday. “However, an agreement without a follow-on peace deal would be volatile and impossible to sustain.”
The dots need to be connected without any loose ends to keep the markets from falling. Every knot is now linked to the peace deal, and the situation is no longer just about the prospects of oil prices. “All these risks are connected,” Sweet wrote. “The key question is how the peace deal in the Middle East unfolds.”
The goalpost for signing the peace deal has moved back and forth for two months. The process is extending beyond the imagined timeline, adding extra pressure on a global market trying to recover from the February slump.
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