The commodities market is not panicking yet

XTI/USD

Key zone: 85.00 - 90.00

Buy: 93.50 (on a confident breakout of the 90 level); target 97.50-100.00; StopLoss 92.70

Sell: 83.50(on strong negative fundamentals); target 78.50; StopLoss 84.30

The commodity market is completely tied to the situation in the Middle East, and making forecasts without taking this factor into account is meaningless. At the same time, after Trump’s statements, the conflict remains in a suspended state.

Recall:

Oil prices exceeded $110 per barrel amid the war with Iran and supply disruptions in the Middle East. The escalation of the conflict led to the closure of the Strait of Hormuz — a key route through which about one-fifth of the world’s oil supply passes. Amid threats to shipping, production cuts, and overall geopolitical tensions, the market is experiencing the largest price spike in recent years.

By the way, the conflict with Iran matters for U.S. indices (and cryptocurrency) only because of oil prices. If it were not Iran but, for example, Afghanistan, this war would have had minimal impact on the commodity and stock markets — only the defense industry sector would have remained steadily profitable.

• At one time, Trump received enormous trust from Texas oil producers, who desperately need high prices. Another key task for Trump is to slow the growth of the Chinese economy, which automatically requires forcing Beijing to buy oil without significant discounts.
• OPEC+ increased production quotas. This may affect prices, but first, the scale of the increase is insignificant. Second, large volumes of raw materials are currently blocked in the Strait of Hormuz.
• Trump announced that the United States is ready to insure ships despite all risks — from a foreign policy perspective this is a reasonable decision. But under current conditions, no rational shipowner or oil trader will take such risks.
• Oil may jump slightly again on certain news, but the main driver has already passed. Politicians and the key players of the commodity market are simply searching for a solution acceptable to everyone.

At the moment, Trump said at a press conference in his golf club in Miami that the war with Iran will end “very soon.” Against this background, oil, gas, and gold performed a technical correction and are waiting for more serious arguments.

And what is the result?

While Superman Donny is trying to find the most favorable outcome for his personal ratings, the market has once again priced in the end of the active phase of hostilities in the near future. Therefore, a prolonged blockade of the Strait of Hormuz or a new round of escalation from Trump could hit prices again — and each new shock will be more dangerous.

The only scenario in which the war will again begin to negatively affect commodities is its prolonged nature, which for now nobody believes in.

When the conflict ends (or is paused), markets will again detach from geopolitics and start paying attention to macroeconomics, corporate earnings, and regular statistics. By the way, the situation in U.S. producer inflation data is quite unpleasant. But we will examine this later — de facto, the war is still ongoing.

So we act wisely and avoid unnecessary risks.

Profits to y’all!