Brent: Hormuz reopening pressures prices lower – Commerzbank

Commerzbank’s Henry Hao and Moses Lim note that progress on reopening the Strait of Hormuz has driven Brent and WTI sharply lower, easing inflation risk premia in global bond markets. They emphasize that improved shipping safety and political negotiations have reduced near-term geopolitical risk premia in Oil.

Hormuz normalization weighs on Brent

"The main theme overnight was the acceleration in the reopening of the Strait of Hormuz, which drove a sharp drop in oil prices and a broad rally in global sovereign bonds."

"Progress toward normalizing shipping through the Strait of Hormuz dominated market narratives. More tankers crossed the waterway with their satellite signals switched on, pointing to growing confidence among shipowners and traders. Iran and Oman announced they would begin work on an agreement covering the future administration of the strait, including transit costs."

"The International Maritime Organization confirmed it had secured safety guarantees to evacuate more than 11,000 stranded seafarers, with the operation to be carried out in cooperation with Iran, Oman, and the US. Separately, President Trump declared that any tolling arrangement on Hormuz shipping would be “unacceptable” to the US, drawing a red line in ongoing negotiations."

"The cumulative effect of these developments accelerated the oil price decline and reduced near-term inflation risk premia in the bond markets."