Sometimes the medicine turns out to be worse than the disease. In 2022, at the start of the Russian-Ukrainian conflict, IEA members decided to sell 189 million barrels of oil from strategic reserves. The goal was clear – to increase supply and lower prices. However, the market was so scared that the news increased the panic and inflated Brent by 20% a week after the release. The fire in the Middle East led to the intention of the United States and other countries to sell even more black gold than then. How will oil and EURUSD react?
The American dollar has become an oil currency. It is Brent that is currently moving the financial markets. The growth of black gold not only improves the terms of trade in the United States, but also increases the demand for greenback as a currency for energy transactions. The United States, due to its status as a net exporter, is more insulated from the energy shock than most G10 currency-issuing countries.
The markets are so nervous that they are starting to react to messages on social networks not only from Donald Trump, but also from representatives of the American administration. Thus, the statement by US Secretary of Energy Chris Wright about the successful escort of a tanker by the US military through the Strait of Hormuz accelerated the peak of Brent and WTI and sent the EURUSD quotes up. As soon as it was deleted, and the White House denied the information, oil soared, bringing down the quotes of the main currency pair.
In fact, the massive reduction in production by the Gulf states suggests that the North Sea variety is more likely to return above $ 100 per barrel than to fall to $70.
On the other hand, there is some good news. According to Goldman Sachs, over the past four days, the volume of oil transported by tankers through the Strait of Hormuz has risen from zero to 1.6 million bpd. This is significantly less than the pre-war 20 million bpd, but the trouble has begun!
The key question for Forex remains, when exactly will the conflict in the Middle East end? Donald Trump’s statement that the war will be short means that the president is beginning to feel political pressure. He’s ready to declare victory and come out. However, Iran may not allow the Republican to sell his TACO. The “Trump always backs down” deals became possible as the counterparties backed down to the White House. This time it’s different.
