The brief reopening of the Strait of Hormuz barely lasted a day. That before Iran’s military decided to shut down passage of the waterway again as Tehran is dissatisfied with the continued US naval blockade. After that, US president Trump said that he was still optimistic that a deal could get done but not before threatening to strike Iran’s civilian infrastructure if there wasn’t one.
Come today, we’re seeing a barrage of headlines from Iran in claiming that they will not back down from their negotiating position. Adding that there remains significant “differences” on key issues such as nuclear and that “the gaps have not narrowed”. Still, one can argue that markets are taking all the latest developments in stride for the most part.
Sure, oil prices are higher having opened with a gap up today. However, Brent crude is sitting just 5% higher now near the $95 mark. Meanwhile, WTI crude (June contract) is seen up over 5% to around $87.20 currently. Both have not pushed gains all too much on the session, with upside momentum being kept on a tight leash.
Meanwhile, S&P 500 futures are only down by just 0.4% and well off the lows from the open today – which saw a drop of a little over 1%.
It sure doesn’t feel like we are seeing a big shift in risk sentiment, at least not one you can tell by the market moves. That as compared to the setback from the headlines since the weekend. In reading the news, it feels like we’ve just a hit a snag with progress being reset to before the ceasefire. Speaking of which, we’re only just two days away from the ceasefire deadline as well.
Yet, here we are seeing markets looking rather sanguine even if there is a bit of a risk retreat today. The market reaction seems to suggest that things are not that bad. However, could it be the case that traders and investors are keeping their faith in expecting positive news to eventually come? To be more specific, it looks like market players are feeling quite assured that Trump will eventually come out and deliver another round of good news.
Two weeks ago, Trump gave markets a lift by announcing a ceasefire in hostilities. And when markets were feeling in the dumps last week, he again came to the rescue by touting “an amazing two days” ahead of what was supposed to a second round of talks. Eventually, that culminated in the supposed “reopening” of the Strait of Hormuz. But as mentioned above, that barely lasted a day before everything from Friday fell apart.
So, third time’s the charm then?
