With pretty much the whole finance world expecting crude oil and gold prices to have surged on Monday following the US-Iran war on the weekend, as trading for both goes live Monday morning Australian time, we can see widely held expectations were sound.
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As at 10.30am AEDT, the price of Bretn Crude has jumped over +9% to US$79.48/bbl. This reflects a one-year-high for the price of black gold, and for Australians, we can expect to see a climb in Australian service station prices in several days’ time.
While Iran hardly produces as much oil as it did in the 1970’s oil crisis, which I write about often, what does matter is that oil trading firms are holding back from using the Strait of Hormuz at this time.
That crucial naval passageway which straddles Iran’s border sees some 20% of global oil travel through it. So in that way, oil from other petrostates then becomes bottlenecked.
While Iran hasn’t shut the Strait of Hormuz – there’s now nobody to do so until the country reforms a government, if it can – the ongoing ability of Iran’s military to fire missiles and attack other countries with US bases has left shippers and traders nervous.
While players like WoodMac see Brent potentially hitting US$100/bbl, perhaps more tame estimates saw a climb in Brent to US$80/bbl – which is what we’re seeing first thing Monday. JPMorgan, at least, don’t expect this to last much beyond the conflict’s conclusion. Trump says that could take four weeks.
(Fun fact: the total amount of Iranian crude feedstock Chinese refiners handle each year is only around 10%.)
What about gold?
Gold prices, too, have climbed out the gate on Monday.
As at 10.40am AEDT, prices had only climbed +2% – which may or may not be surprising depending on how far you thought gold could have climbed.
With that said, at the time of writing, fluctuations appear to be biased towards an upward trajectory. To see where it ends at the close of the ASX may be more telling.
Given how hard the price has ran in recent history, however, that might be expected. On a one month basis, gold has climbed +15% over the last month, perhaps suggesting some of this was already priced in.
As for silver, the second-safe-haven-metal is up +2.7% a/a 10.40am AEDT to US$96.30/oz.
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