Assessing Geopolitical Risks: Oil Prices React
Market Response
Oil prices saw a slight uptick on Tuesday, rebounding from the previous session's dip, as investors continued evaluating the implications of geopolitical tensions in the Middle East.
Brent Crude and WTI Prices
Global benchmark Brent crude oil futures climbed 27 cents to reach $87.27 a barrel, while U.S. West Texas Intermediate crude futures also rose by 26 cents to $82.16 a barrel.
Previous Session Performance
In the previous session, both benchmarks experienced a minor setback, declining by 29 cents. This came amidst indications that recent escalations between Israel and Iran had limited immediate impacts on oil supplies from the region.
Analysis of Geo-Political Risk
Sugandha Sachdeva, founder of Delhi-based research firm SS WealthStreet, noted the diminishing effect of geopolitical risk premium on crude oil prices due to relatively undisturbed supply. However, she emphasized the ongoing significance of geopolitical dynamics in shaping oil market trends.
Continued Uncertainty
While the likelihood of a full-scale war between the involved countries remains low, any escalation in tensions could swiftly reverse the current market trajectory, Sachdeva cautioned.
Policy Measures
ANZ analysts highlighted recent developments, including U.S. approval of new sanctions on Iran's oil sector and the EU's tentative agreement to expand sanctions on Iran following recent attacks on Israel. These factors contribute to the prevailing geopolitical uncertainty.
Volatility Outlook
Given the precarious geopolitical backdrop, characterized by multiple risks, analysts anticipate continued market volatility until there is greater clarity. The situation remains fluid, with ongoing developments impacting market sentiment.
Other Influencing Factors
In addition to geopolitical concerns, investors are awaiting the release of key economic data, including U.S. gross domestic product figures and March personal consumption expenditure data. These metrics will provide insights into the future trajectory of monetary policy.
Inventory Expectations
Preliminary forecasts suggest an anticipated increase in U.S. crude oil inventories for the previous week, alongside a potential decrease in refined product stockpiles. These factors, combined with persistent U.S. inflation and hawkish statements from Federal Reserve officials, serve as constraints on crude oil price growth.
