Brent oil prices fell in early Wednesday trading and were hovering just above $100 as the European session got underway. There has been a turnaround in the financial markets. The US dollar and energy prices, which rose and remained elevated throughout March, gave up some of those gains after the US administration signalled, on Tuesday, that it may be considering stepping back from the war against Iran. That prospect gave traders reason to be cheerful, increasing risk appetite and driving gains across the board in stock indices and in all major currencies against the US dollar. However, the underlying conditions have not, for now, changed. The Strait of Hormuz remains virtually closed, and it is not clear how, even in a scenario where the US retreats from the region, shipping would return to normal in the Persian Gulf. Another important consideration is that even the most optimistic scenario entails prolonged disruption to oil and gas supplies from the Middle East because of bottlenecks and reduced production capacity. Against this backdrop, it is possible that the optimism seen on Tuesday may give way to a more realistic assessment, which could yet bring fresh gains in the price of the barrel.
Ricardo Evangelista, ActivTrades
Source: ActivTrader
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