Easier said than done. Donald Trump claimed that American ships would escort cargo through the Strait of Hormuz. However, given the five tankers burned by Iran, the presence of submarines and mines, it is unsafe for the military. The US president assured that the conflict in the Middle East would end soon, and oil prices would fall due to large-scale sales of strategic reserves. In fact, there is no end in sight to the confrontation, and the markets are doing fine with mathematics, which is causing EURUSD to fall.
400 million barrels. At first glance, this is a colossal amount, more than twice as much as the sale of oil from strategic reserves at the start of the armed conflict in Ukraine. However, in fact, we are talking about only 4 days of global consumption of black gold. According to Capital Economics, IEA members have never released more than 2.5 million bpd to the market. About 20 million barrels per day passed through the Strait of Hormuz before the war.
Obviously, strategic reserves will not save the situation. This is a drop in the bucket, and the decision to sell oil scared the market even more than it calmed it down. As a result, Brent is once again moving towards the psychologically important mark of $100 per barrel, forcing the EURUSD to take steps to restore the downward trend.
The U.S. Energy Information Administration is raising its forecast for the average price of the North Sea variety from $58 to $79 per barrel in 2026 and from $53 to $64 per barrel in 2027. The EIA is well aware that the conflict in the Middle East will have long-lasting consequences. Even if it ends today, it will take a long time before oil flows through the Strait of Hormuz are fully restored. It is enough to recall the Red Sea. Even 6 months after the Houthi attacks stopped, the movement has not returned to normal. It seems that high prices for black gold are serious and will last a long time.
Unsurprisingly, the EURUSD reacted quite calmly to the reluctance of consumer prices in the United States to accelerate. Their current levels of 2.4-2.5% seem to give the Fed an opportunity to lower rates. However, the February readings can now be considered as a base. The numbers are guaranteed to grow due to the rise of Brent. The question is, how high will American inflation rise in the future?
The EU expects its acceleration in Europe to 3% and a slowdown in economic growth by 0.4 percentage points due to the conflict in the Middle East. There will be no repeat of the energy crisis in 2022. Does this mean that the euro will not fall below parity with the US dollar? We’ll see.
