Lack of Basis for Optimistic Expectations on US-Iran Agreement, Oil Prices May Hit New Highs This Summer
Piper Sandler's latest report indicates that the market's optimistic expectations for an imminent agreement between the US and Iran lack basis, and the Strait of Hormuz may remain largely closed in the coming months, potentially leading to new highs in oil prices this summer.
The agency believes that shipping through the strait is unlikely to recover to 50% of pre-war levels in the short term, and supply shortages will continue to drive up energy prices. Recent US airstrikes and Iran's warning that "there will be a cost for passage" further exacerbate uncertainty.
Dave Ernsberger, President of S&P Global Energy, stated that the market is "afraid to establish crude oil positions" due to the confusion surrounding negotiations, strait openings, and potential fee mechanisms.
Source: Public Information
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Piper Sandler has maintained a cautious stance in its geopolitical energy risk analysis, and this report continues its assessment of the long-term impacts of supply disruptions in the Middle East, emphasizing that even if an agreement is reached, it may take months to a year for global crude oil transport to return to normal.
On the capital front, traders are significantly reducing crude oil positions, shifting towards defensive allocations and hedging with energy derivatives, while capital is concentrating on US shale oil producers, defense contractors, and alternative energy sectors, motivated by the need to address ongoing supply shortages and rising shipping and insurance costs due to potential Iranian "service fees."
Similar to the surge in oil prices and global shipping costs during the Red Sea crisis, as well as the lasting disruptions to the energy market from the 2022 Russia-Ukraine conflict, the current situation in the Strait of Hormuz places the global energy supply chain in a phase of high volatility and price re-evaluation.
Essentially, this is a restructuring of the supply chain: geopolitical conflicts and potential fee mechanisms are reshaping the cost structure of global crude oil transport, as the risk of disruption in critical chokepoints forces capital to shift from reliance on low-cost Middle Eastern routes to diversified supply sources, strategic stockpiling, and long-term contract locking, driving the energy supply chain from a single fragile path towards a more resilient, multipolar network.
ABAB News · Cognitive Law
The narrative of the agreement runs fast, but the recovery of the supply chain is always half a beat slow.
When the strait is blocked, global oil prices pay the tuition for negotiations.
Smart capital does not bet on optimistic expectations but lays out long-term resilience amid chaos.