And round and round we go. We started the week with renewed optimism that the US and Iran might finally be inching towards a diplomatic breakthrough. That led to oil prices tumbling on Monday as hopes of a potential deal gathered momentum. But fast forward to today, and we’re pretty much back where we started.
Anyone got a case of déjà vu? These have been the same sort of headlines that we have been dealing with for almost seven months now.
The latest comments from a senior Iranian official to Reuters:
- Tehran’s conditions must be met if the US wants the Strait of Hormuz reopened, with nuclear talks only possible afterwards
- Iran is prepared to respond forcefully to US strikes, both in the region and beyond
- Mediators are working hard to narrow gaps between Tehran and Washington
Now, that is hardly the language of two sides getting ready to shake hands.
The thing about all this is that the sticking point remains the same. Iran wants its demands addressed before reopening the Strait of Hormuz, while the US is not willing to agree to those terms. And despite the diplomatic exchanges, neither side appears ready to make the concessions needed to break the deadlock.
For markets, it just exemplifies the narrative that the underlying geopolitical risks haven’t gone anywhere.
While Monday’s selloff in the oil market may have shown how quickly traders were willing to price in a potential easing of tensions, the fact of the matter is the reality is not quite there yet.
There’s been a lot of talk about what could happen once the US midterms are over and done with. So, we’ll have to see if Trump will be bold enough to step up his game after the election later today. The real test will come after the votes are cast, when we’ll see whether diplomacy can produce anything concrete or whether the threat of renewed military escalation returns to the forefront. Knowing Trump as we do, the latter certainly seems rather likely.
This article was written by Justin Low at investinglive.com.