News & analysis
Oil Jumps as Iran Ties Hormuz Reopening to Sanctions Relief
Brent's 4.2% climb to about $103 a barrel came as Washington denied an outright diesel export ban, leaving refiners to curb shipments voluntarily while rate markets priced a near-70% chance of an October hike.
By PREVICT Research
Key points
- Brent rose 4.2% to about $103 a barrel and WTI gained 2.5% to $92.8 after Iran's president linked reopening the Strait of Hormuz to lifting sanctions and the US blockade.
- The US administration denied an outright diesel export ban, saying it is working with refiners to limit exports voluntarily.
- Strong US PMIs and hawkish Fed commentary pushed the 2-year yield up 14bp and the 10-year up 15bp, with markets pricing just under a 70% chance of an October hike and a year-end fed funds rate near 4.25%.
Brent crude rose 4.2% to around $103 a barrel and WTI gained 2.5% to $92.8 after Iran's President Pezeshkian said the Strait of Hormuz would stay closed as long as sanctions and the US blockade remain in place, according to Westpac. Dated Brent traded near $120.
The oil move had two drivers. Iran's condition on Hormuz supplied the supply-side trigger, while reports of a US diesel export ban added to the rally. The administration denied an outright ban and said it was working with refiners to voluntarily limit exports, leaving the actual constraint on distillate shipments short of a formal prohibition.
Rates reinforced the pressure. Strong US PMIs and hawkish Fed commentary lifted the 2-year yield 14 basis points and the 10-year 15 basis points. Markets priced just under a 70% chance of an October hike, a December hike in full, and a year-end fed funds rate around 4.25%.
The dollar strengthened, and the Australian dollar weakened ahead of labour data even as markets continued to price a high probability of further RBA tightening. Attention also turns to the Trump-Xi meeting, though expectations for a major breakthrough remain low.
Read next
Market brief
Euro Breaks Below 1.140 as ING Calls the Move Stretched Undervaluation
Photo by Ibrahim Boran on UnsplashMarket close
Meta Shares Up 21% Since Muse Launch as Chatbot Tops U.S. Free App Chart
Photo by Dimitri Karastelev on UnsplashNews & analysis
US Energy Secretary Wright Opposes Diesel Export Ban, Warns It Would Backfire
Photo by Austin Distel on Unsplash
