Much uncertainty remains as the world continues to grapple with an energy shock.
“The underlying situation is still incredibly fragile or flammable,” said IG market analyst Tony Sycamore.
“It doesn’t seem like all of the parties are on the same page … Trump can talk all he likes, but the Strait (of Hormuz) is closed and it’s staying closed until all the Iranians get on the same page, and that’s where we’ve got a problem.”
Trump’s decision to U-turn hours before the deadline came up was pounced on by observers as another example of a TACO moment – an acronym of “Trump Always Chickens Out” – in which he escalates before pulling back from the brink.
But Stephen Innes at SPI Asset Management warned the president may have overplayed his hand.
“You can talk down a market. You can jawbone crude lower. You can release emergency reserves and tweak sanctions to flood the tape with supply optics,” he wrote.
“But you cannot instantly repair disrupted shipping lanes, fractured refining capacity, or the insurance black hole forming around tanker traffic. The market may trade the headline in the short term, but it settles on the barrel in the medium term. And right now the barrel is still constrained.”
While two tankers bound for India sailed through the Strait of Hormuz on Monday, the war continues to disrupt traffic through the waterway.
“The war has resulted in lasting damage to infrastructure, so even if it’s over soon, energy prices may well remain higher – and bond and equity prices lower – for longer than they otherwise would have been,” said Thomas Mathews, head of markets for Asia-Pacific at Capital Economics.
Meanwhile, the Wall Street Journal reported that Saudi Arabia and the United Arab Emirates were considering joining the fight following persistent and damaging attacks from Iran since the US-Israel strikes began on Feb 28.
The article said they were not deploying troops but pressure was building on them to do so as Tehran looks to exert greater sway over the region.
Elsewhere, the European Union and Australia struck a long-awaited free trade deal on Tuesday as they completed years of negotiations to boost exports in the face of global uncertainty over trade.
They also signed an agreement to step up defence cooperation as well as critical raw materials.
https://www.channelnewsasia.com/asia/asia-stocks-oil-price-trump-iran-war-6012861
