[MARKET ANALYSIS] Crude slips amid reports of a potential Strait of Hormuz breakthrough

Renewed downside was seen in crude prices following headlines in Arab press that a breakthrough may be reached between US and Iran in the coming hours regarding the Strait of Hormuz. Further, Israeli press suggested Iran has agreed to transfer its 60% HEU to a third unknown country. That being said, it’s worth noting that none of the reports thus far have come from Iranian outlets.
Regarding the state of talks, US President Trump is optimistic about a framework, and Iran is expected to respond to the US proposal via mediators on Thursday. Axios reported Trump could still turn to military action without an agreement before his China trip. Iran is expected to provide its reply to the US proposal for ending the war to mediators on Thursday, CNN reported, citing a regional source. WSJ editorial said, from its discussions with senior officials, current US red lines in the talks include Iran confirming it does not seek nuclear weapons; the dismantlement of Fordow, Natanz and Isfahan; a ban on underground nuclear work; and on-demand inspections with penalties for violations. Elsewhere, on the ground, Israel struck Beirut for the first time since the Lebanon ceasefire, reportedly eliminating Hezbollah’s Radwan Force commander.
WTI and Brent futures have been trading off the hopes of oil flowing through the Strait once again. Brent July resides towards the bottom end of a USD 97.44-102.55/bbl range; WTI June sits towards the bottom of a 91.92-96.48/bbl range at the time of writing. Dutch TTF this morning dropped to EUR 42/MWh on the report from near EUR 45/MWH before stabilising around EUR 43.50/MWh.
Spot gold topped Wednesday’s USD 4,723/oz high to reach a current peak of USD 4,753.43/oz, amid the aforementioned pullback in energy. Spot gold sees its 100 DMA at USD 4,774.67/oz.
Base metals are mostly firmer as the pullback in crude prices bodes well for risk sentiment and broader global economic growth. That being said, 3M LME copper is flat within a USD 13,331.58-13,448.83/t range as it takes a breather from yesterday’s gains.