WTI and Brent Fluctuate Wildly, Investors Eye Iran's Response
Oil price volatility is a major threat to investor appetite for riskier assets. Renewed tensions between the United States and Iran have further stymied oil prices, although prices, still hovering around the US$70s, are not considered strong enough to drastically alter central bank policy.
The US attack on Iran and the revocation of sanctions relief for Iranian oil briefly pushed WTI up to US$75 per barrel, while Brent reached US$79 per barrel. However, both benchmarks later pared some of their gains from session highs.
The market appears to have remained relatively calm in response to President Donald Trump's statement regarding the possible end of the ceasefire. However, the key question for investors is whether this latest escalation will trigger another oil supply shock or simply create temporary volatility driven by news sentiment.
Higher oil prices can indeed boost inflation expectations and influence interest rate forecasts. However, as long as oil remains in the US$70s, the market believes these conditions are not enough to force central banks to signal further monetary policy tightening.
From a market analyst perspective, market positioning also plays a role in the surge in oil prices. Excessive selling occurs when the RSI indicator shows oversold conditions, so some of the increase occurs because traders close short positions. However, increased oil volatility continues to widen the price range.
This condition has the potential to trigger larger movements in the interest rate market and depress sentiment toward risky assets. Another risk to watch is the potential response from Iran, as the direction of future talks could be beyond Washington's control. This requires traders to prepare for significant two-way risk. (yds)*
Source: Newsmaker.id
