[MARKET UPDATE] Oil retreats from surge as lack of fresh escalation and tariff woes prompt profit-taking heading into the weekend
- Geopolitics have shown no signs of abating, although a fresh escalation outside of the daily strikes is yet to occur. To briefly recap the main geopolitical points, the US and Iran continued to exchange strikes, with CENTCOM conducting a 13th night of attacks on Iranian military targets and Iran targeting neighbours. US President Trump said Iran wants to reach an agreement but is not yet ready. Further, Iran reportedly rejected a US ceasefire proposal presented by Iraq’s PM, while Tehran also refused to amend a separate 10-day ceasefire plan linked to discussions over the Strait of Hormuz. Crude has been pulling back from yesterday’s extremes despite a lack of a clear driver during the European morning. Against the backdrop of a lack of fresh escalation today, traders could be booking profits in oil heading into another uncertain weekend. Further adding to the downside could be trade war woes after the Trump administration imposed new tariffs of 10-12.5% on imports from 60 countries over claims that they had failed to prevent forced labour, with China condemning unilateral tariffs this morning.
- WTI and Brent futures are softer by over 2% after surging some 6-7% intraday yesterday, with the former toward the lower end of a USD 89.64-90.66/bbl range and the latter back under USD 100/bbl in a USD 97.51-101.19/bbl range. Dutch TTF is choppy but ultimately flat at the time of writing around the EUR 62/MWh mark after finding support at EUR 61/MWh. Analysts at ING note, “With little-to-no sign of de-escalation, the market is likely to take the path of least resistance for now. This suggests oil prices will only continue to move higher. The key question is at what price level pressure begins to build on the Trump administration to return to the negotiating table.“
- Precious metals see some reprieve from the pullback in the energy space. Spot gold rebounded from a USD 4,022/oz intraday low and currently resides towards session highs of USD 4,053/oz. Spot silver sees more momentum after hitting a low near USD 57/oz yesterday before rebounding to a current USD 58.42/oz peak today. Base metals are flat/mixed and fail to benefit from the pullback in energy amid pressure from tariff woes. 3M LME copper resides in a narrow USD 13,574.88- 13,683.63/t range.
Geopolitical risk premia in crude have historically been built and unwound on the escalation cadence rather than the underlying conflict level: prices spike on fresh strikes and bleed lower on quiet sessions even when the backdrop is unresolved, and Friday profit-taking ahead of an unhedgeable weekend is a well-established pattern in active conflict episodes. The distinction worth drawing is between a ceasefire-driven unwind, which historically strips the premium quickly, and a consolidation on absent headlines, which tends to leave the floor under prices intact given the rejected proposals described here keep supply risk live. The tariff overlay transmits through the demand side, historically pressuring base metals and the industrial complex more than energy itself, which fits the split between soft crude and a copper market failing to rally on cheaper energy. The Hormuz dimension is the asymmetry: episodes involving transit risk have tended to reprice freight, insurance and prompt spreads well before any physical disruption. What bears watching is whether the pullback holds through weekend headlines, how Monday's open treats any diplomatic follow-through on the ceasefire tracks, and the level at which political pressure on Washington resurfaces, which past episodes suggest acts as a soft ceiling on the premium.