Oil prices have fallen and stocks have risen following the agreement to re-open the Strait of Hormuz. However, some traders worry that the rally in stocks and drop in oil prices might be overdone.
Market Reaction
WTI, the US oil benchmark, settled at $76.60 a barrel on Thursday, down almost 10% on the week. Gas prices have also dipped below $4 a gallon for the first time since March. US stocks are near record highs, with the S&P 500 up 9% since the war with Iran started in late February.
Analysts have noted that the market might be disregarding risks and moving on more enthusiasm than reality. Traffic through the Strait of Hormuz remains a drop in the ocean compared to pre-war levels, and insuring ships there remains costly. Questions also remain about mines in the strait.
The agreement outlines a 60-day ceasefire period, and the strait could potentially close up again after that, or logistical concerns could arise if Tehran demands to earn traffic fees. Producers in the Gulf region will also need time to revamp their production and recover from war-related damage.
Original reporting: KEYT (Ventura/Santa Barbara) — read the source article.
