WTI crude oil is at the highs of the day and near the highs of the war. It's up $4.85 to $117.27 in what would be the highest close since 2022.
Prices have jumped about $1 in the past few minutes as the oil market continues to flag major risks. Those risks aren't at all encapsulated in the stock market, which continues to indicate that the war will be a short-term problem.
The pricing isn't entirely disconnected because if you look further out the oil curve, prices do come down. July WTI is up $1.66 to $91.90 today while December crude is up $1.38 to $75.24. If we can get back to around $75, it's not even close to a full retracement of the pre-war $60ish level but it's not a shock to the economy like $117.
So I would strongly suggest that if you're looking for clues from the oil market on war sentiment, to make sure you look at the entire curve rather than just the front month.
Some good news is trickling out now as the Tehran Times deleted an earlier post that said that diplomatic channels had been closed. In its place, it wrote that said diplomatic channels with the US are not closed. So that's a bit of good news but at the same time, every report says that chances of a deal before 8 pm ET are low.
The bullish case for oil is that this is a classic escalation trap. If/when Trump bombs the power plants and energy infrastructure then there is no going back. Iran has pledged to attack regional energy infrastructure and that will ensure many months before anything can be repaired.
As for Hormuz, we don't know if Iran can enforce a blockade or for how long but we're more likely to find out if the US escalates.
The nightmare scenario is that the US ends up in a multi-year land war against a country of 90 million that's dug into the mountains.
