Headlines:
- Fars news denies reports of Iran ready to reopen Strait of Hormuz if the US eases blockade
- Oil prices extend decline as Saudi Arabia restarts East-West pipeline, prepares to resume crude exports
- Silver remains supported amid growing Middle East de-escalation hopes as Iran offers to reopen Hormuz
- Oil prices hover near $100 ahead of potential US-Iran talks, what happens if Brent crude breaks lower?
- Iran offers to reopen Strait of Hormuz within seven days if US eases blockade
- 10-year Treasury yields stay near 5%, what would trigger the next break higher?
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- European stock market open: Stocks turn mixed as oil rebounds and investors eye US-Iran talks
- Crude oil remains under pressure as de-escalation bets increase amid mounting constraints for Trump
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- Fed rate hike bets support the US dollar, but how much further can it run?
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Markets:
- WTI crude down -3.30% to $89.33
- US10Y yield down 3 bps to 4.93%
- NZD leads, AUD lags on the day
- Gold down -0.57% to $4318
- Bitcoin down -1.18% to $85,951
- European indices higher; S&P 500 futures up 0.06%
The main highlight of the session was a Kyodo report saying that Iran has offered to reopen the Strait of Hormuz within seven days if the US lifted its blockade of Iranian ports and halted military operations around the strait. The proposal was reportedly conveyed to Washington through intermediaries as diplomatic efforts intensified around the UN General Assembly. The report was later confirmed by Reuters.
Following the news, oil prices dropped quickly as markets continued to bet on de-escalation and the subsequent ease in supply constraints. There was of course also a positive reaction across other markets. Stocks, cryptocurrencies, gold and so on rallied after the news as de-escalation would ease inflation and rate hike bets, ultimately supporting risk assets. The US dollar, on the other hand, erased some of the earlier gains as rate hike probabilities for October fell.
Crude oil then extended the losses after Saudi Arabia was said to be ready to resume crude oil exports from the Red Sea port of Yanbu as early as Tuesday, according to people familiar with the matter. Several Asian refiners have reportedly been informed by Saudi Aramco that they will soon be able to collect crude from Yanbu again.
Toward the end of the session, Fars News denied reports of Iran offering to reopen the Strait of Hormuz citing Iranian sources. Following the Fars report, oil prices erased some of the earlier losses but the momentum hasn’t been that strong. This might be a sign that the market is still assigning a higher chance of de-escalation given the constraints that Trump is facing amid munitions shortfalls, elevated yields, rate hikes, sinking political approval and Gulf governments pushing for an end to the conflict.
In the American session, we have lots of Fed speakers but the focus will be on the UN General Assembly. Trump is expected to deliver his speech around 13:30 GMT/09:30 ET and then meet with many global leaders. The most important meetings for the markets are those with Gulf leaders and potentially the Iranian delegation. The markets will be focused on de-escalation headlines as that would keep downward pressure on oil prices, easing inflation and rate hikes concerns. Hawkish remarks or comments suggesting a possible re-escalation, on the other hand, would likely send oil prices much higher and weigh on general risk sentiment.
This article was written by Giuseppe Dellamotta at investinglive.com.