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[MARKET ANALYSIS] Crude grinds higher heading into the weekend as Trump returns from China and refocuses on Iran

The geopolitical landscape has worsened following President Trump's return from China, as he refocuses on Iran amid escalating military options.

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[MARKET ANALYSIS] Crude grinds higher heading into the weekend as Trump returns from China and refocuses on Iran

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  • Geopolitical risk has heightened as US President Trump returns from his trip to Beijing and refocuses on the Iran situation. As a reminder, reports yesterday via Axios suggested US President Trump's team is now discussing options for military escalation to break the deadlock. Axios added that US officials said Trump could make his next move immediately after his trip to China. Options reportedly include 1) resumption of "Project Freedom," with the Navy attempting to break the logjam in the Strait of Hormuz, 2) the launch of a new bombing campaign focusing on Iranian infrastructure. Meanwhile, Israeli officials cited by Axios said they'll be on high alert this weekend in case Trump decides to resume the war.
  • In terms of more recent updates, Trump warned it is “just a question of time” regarding Iran and said he will not be “much more patient” with Tehran, while reiterating that the US is monitoring Iran’s enriched uranium and could strike again if necessary, although he would prefer a diplomatic outcome. Trump added that he discussed Iran with Chinese President Xi and both sides agreed the war should end, with China later confirming the leaders reached new consensuses and calling for a comprehensive and lasting ceasefire alongside dialogue on Tehran’s nuclear programme. However, reports suggested that Washington informed Israel that Trump could still authorise fresh strikes inside Iran, while the Tehran Times reported the US formally rejected Iran’s 14-point proposal and maintained its hardline nuclear stance. Meanwhile, the US House rejected the Iran war powers resolution in a tied vote, allowing Trump to continue military operations or maritime pressure campaigns against Iran without new congressional authorisation for now.
  • In the European morning, an uptick in crude and a leg lower in sentiment coincided with comments from Iranian Foreign Minister Araghchi, who noted contradictory messages from the US remain the main issue. On the supply side, it’s also worth noting that the UAE announces accelerated pipeline construction to bypass the Strait of Hormuz. Nonetheless, WTI Jul rose above USD 100/bbl to currently trade towards the top end of a USD 97.23-100.76/bbl range, while its Brent Jul counterpart resides at the upper end of a 106.26-108.96/bbl parameter. Dutch TTF front-month trades higher by just shy of 3% at the time of writing, north of EUR 49.MWh, vs an earlier low of around EUR 47.60/MWh.
  • Precious and base metals are softer across the board, given the energy-induced strength in the USD. Spot gold trades in a USD 4,550-4,665/oz as it eyes the 6th May low at USD 4,546/oz. Spot silver sees deep losses for a second straight session as it continues to recoil from a recent rally, with prices hitting a USD 77.57/oz low vs USD 83.88/oz intraday high, and after hitting a USD 89.37/oz peak on Wednesday. 3M LME copper continues to pull back from record levels, dipping under USD 14,000/t to trade in a current USD 13,586.00- 13,961.03/t range.
Context

This re-emphasis on military engagement could disrupt crude oil supplies, pushing prices higher as tensions rise. Market participants should monitor for developments that may further impact energy and related markets, especially following recent comments from Iranian officials and the US response regarding military capability.

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