On Wednesday, when the US-Iran conflict has reached its 152nd day, Iran has not sought negotiations with the United States over the past two weeks and will not relinquish control of the Hormuz Strait, a senior Iranian official said yesterday, hours before the country launched a fresh round of missile attacks against US bases in Jordan.
Meanwhile, US President Donald Trump asserted that Iran was “dying for a negotiation,” according to Deputy Foreign Minister Kazem Gharibabadi. However, Gharibabadi presented a contrasting perspective during an interview on Iranian television late Tuesday.
On Wednesday, the Trump administration issued another round of Iran-related sanctions targeting eight tankers and 10 entities, according to a notice posted on the US Treasury Department’s website.
The sanctions are the latest in a series of “maximum pressure” measures Washington has imposed on Iran’s oil trade and “shadow fleet” in recent months, as the Treasury Department seeks to cut off revenue it says funds Tehran’s weapons programmes and regional proxies.
The move comes as tensions in the Middle East soar with the United States and Iran trading attacks, and desperately needed energy supplies not reaching markets with the Strait of Hormuz in effect closed.
Now, the shipping industry is looking for new options after the recent declaration by the Iranian-backed Houthis that Saudi ships trying to reach the Indian Ocean would be targeted, according to analysts.
Several tankers are using the northern route out of the Red Sea through the Suez Canal or loading oil at Sidi Kerir on Egypt’s Mediterranean coast, where crude arrives through a pipeline from Saudi Arabia, according to shipping data.
I find that the Egyptian route “cannot 100% replace Bab al-Mandeb for crude exports to Asia, as the Houthis declared a naval blockade against Saudi Arabian ports on July 20 and have since claimed to have struck three Saudi tankers — the latest unconfirmed attack being on Tuesday.
Transits through the Bab al-Mandeb have fallen by 22% since the Houthi blockade was announced, according to the maritime intelligence group Windward, from about 48 to 37 per day. Windward also noted that war-risk insurers are now excluding vessels with any history of calling at a Saudi port from Red Sea coverage.
Transits through the Strait of Hormuz remain at very low levels, with the southern route supported by the US military seeing virtually no traffic, according to Windward.
I find that if the conflict spreads across multiple maritime fronts, resilience is becoming increasingly expensive — even if oil markets have yet to fully reflect that reality.
The Federal Reserve on Wednesday held its steady, in a decision that had seen elevated uncertainty coming into it. While the central bank’s action had been mostly expected, the odds of a rate-hike had been higher than recent historical trends due to rapidly shifting inflationary dynamics sparked by volatile oil prices.
The central bank’s Federal Open Market Committee () kept the federal funds rate unchanged at 3.50%-3.75% for a fifth straight meeting.
However, reflecting the uncertainty over the monetary policy outlook, Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari, and Dallas Fed President Lorie Logan voted to raise the federal funds rate by 25 basis points.
This is the second Fed decision under the leadership of new chair Kevin Warsh. Similar to the statement in June, Wednesday’s announcement was truncated, featuring a single-page with the decision and ending in the brief line: “The Committee will deliver price stability.”
Warsh’s public comments since June have been largely hawkish. He has also unveiled a sweeping review of Fed operations by appointing five task forces to tackle items such as communications and inflation frameworks.
The Fed’s job has been complicated by a dynamic situation in the Middle East and the resulting volatility in oil prices since the last rate decision in June. At that time, crude benchmarks were elevated, prompting nearly half of the FOMC’s members to pencil in anticipated rate hikes this year.
Oil slid soon after that following the inking of an interim peace deal between the U.S. and Iran, only for that agreement to fall apart this month and lead to a resurgence in crude prices.
Amid such a scenario, after the announcement of interest on hold by the Federal Reserve, , despite testing the day’s high at $4,084.90, started to reflect the persisting bearish pressure, as trading at $4,067.70, while having tested the day’s low at $3,993.75.
Currently, are trading with above 7% gains, while the are trading with the same percentage of gains, as the chocking of the Strait of Hormuz and Bab el-Mandeb is still intact.
I conclude that if the gold futures could see a selling spree continue despite rates on hold, while energy-driven inflationary pressure due to the re-escalation of the US-Iran conflict.
