![]() Iran accounts for about 4% of global oil supply, and as tensions between the United States and Iran have thawed a bit lately, enforcement of those sanctions has been more lax. To us, this means that today’s markets can probably handle a moderate disruption – for instance, if the United States were to more strictly enforce sanctions on Iranian oil. This is different than conditions faced when Russia invaded Ukraine back then, oil supply was already lacking relative to demand, and as the event disrupted even more supply, prices soared. The muted moves also come as global oil supply and demand today are pretty balanced. ![]() As with WTI, Brent prices rallied from there to their peak of $97 before giving back some gains to end at $88 today. From there, we see a temporary spike in Brent to $87 by mid-April before moving lower again, ultimately reaching a series low of $72 in mid-June. The line begins at $82 and bounces between the $80-90 range until early March, when prices sell off below $75 at their lowest. The Brent crude line follows a similar path, largely remaining ~$5 above the WTI line for the most part. Since then, prices have come off slight to today’s levels of $85. From the end of June, prices rose sustainably toward a high of $94 on September 27. ![]() From there, oil prices spiked to $83 by the middle of April before falling back close to $70 again and remaining there for much of May and June. The WTI line begins at $77/bbl and remains volatile between $75-80 until the beginning of March, when oil sold off to its series low of $67 amid growth concerns during the regional banking crisis. The unit is dollars per barrel.īoth charts follow a similar path. This line chart shows the price for Brent and WTI crude oil since the start of 2023 to today. OIL PRICES REMAIN WELL OFF THEIR SUMMER HIGHS At the time of writing, Brent crude prices are just over +5% higher this week and still well off this summer’s highs. So far, markets seem to think this will remain the case. Neither side are key oil players, and the conflict as it stands does not meaningfully impact oil production or supply. To that end, we examine two primary scenarios: (1) if the conflict remains contained and (2) if it escalates. To gauge any investment impact, we are closely watching the potential for escalation and the follow-through effect on natural resources given it seems like the clearest link to corporate profits, inflation and consumer sentiment. For instance, the attack seems to have put a stopper on U.S.-brokered negotiations around Saudi-Israel relations, things seem to be intensifying between Israeli forces and Iran-backed Hezbollah militants at the Lebanon border and questions abound over whether Iran was involved in some way. The situation is incredibly fluid, but it’s worth noting the geopolitical web is a complex one and stretches beyond the two sides involved. Today, we work to examine the unfolding crisis from that lens. While it is difficult to do so during times like these, our job as investors is to assess what impact the conflict might have on the global economy and financial markets, and then determine if we need to change the advice we are giving about portfolios. Our thoughts are with all of those who have been affected, including our colleagues, clients and their families. The most important impact is the human one, and the loss of life is tragic. The geopolitical ramifications are important and will likely not be fully understood for years. The Israel-Hamas War has shocked the world. Our Top Market Takeaways for October 13, 2023
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