Brent: Geopolitics weigh on prices – ING

ING strategists Warren Patterson and Ewa Manthey note Brent retreated below $90/bbl as hopes for US–Iran de-escalation offset rising supply risks. They highlight reports of a proposed 10‑day ceasefire and ongoing large divisions between the US and Iran. At the same time, a Houthi-declared naval blockade threatens Saudi exports via the Red Sea, though current price action suggests markets doubt its effectiveness.

Brent pressured by mixed risk signals

"Oil prices closed higher yesterday but retreated from session peaks, leaving Brent back below $90/bbl by the close. Prices are trending lower in early morning trading today. There’s some hope of de-escalation between the US and Iran."

"Reports are that mediators are proposing a 10-day ceasefire, which could put the Memorandum of Understanding (MoU) back on track. This won’t be an easy task. Large divisions remain between the US and Iran."

"Additionally, the Houthis in Yemen announced a naval blockade on Saudi Arabia, putting oil supply at increased risk. Since disruptions hit the Persian Gulf, the Saudis have increased exports from Yanbu in the Red Sea, shipping around 4.6m b/d of crude in June, up from around 1.3m b/d at the start of the year. An effective blockade would prevent oil flows to Asia moving south via the Bab el-Mandeb Strait."

"It’s yet to be seen how effective any blockade will be. But, clearly, this development will increase insurance costs. If shippers decide to avoid the Bab el-Mandeb Strait, voyage times will be longer and more expensive."

"Looking at oil price action this morning, the market is not convinced that this blockade will be successful."