- Oman talks on Sept 14 between Gulf and Iranian ministers may ease the Hormuz risk premium.
- Brent crude dipped after nearing $110 on Sept 11, but finished the week up 10%.
- Easing energy inflation fears could boost confidence and lift pressure off risk assets.
On September 14, Gulf foreign ministers are set to meet Iran’s foreign minister in Oman, as part of an effort to secure support for a temporary deal that would let commercial ships pass through the strait. If that happens, the geopolitical risk premium in oil may start to fade.
Oil has already reacted to the possibility of a deal, as Brent crude got close to $110 on September 11 before slipping back, but it still ended the week up around 10%.
So if a credible reopening deal comes together, Brent and WTI could fall sharply as traders start pricing out some of the supply-disruption risk.
However, it wouldn’t necessarily wipe out the general energy risk overnight, especially considering that Hormuz shipping is still badly restricted and the Houthis are threatening another key route in the Red Sea.
Gold and Silver Face a More Complicated Setup
If the chances of a wider regional conflict drop, gold has a chance to lose some of its safe-haven appeal at first. Still, cheaper oil could also lower inflation expectations and push yields lower, which might help the precious metal.
Interestingly, the day before showed the reverse, where higher oil and mounting inflation worries pushed gold down as traders bet on a Fed rate hike. Similarly, silver dropped sharply right alongside it.
As for Bitcoin and the crypto industry, the reaction may be different.
A successful agreement over the Strait of Hormuz could calm fears that soaring energy prices are driving runaway inflation. This would likely boost market confidence and take some pressure off interest rates, clearing away a big roadblock for riskier investments.
Bitcoin was already trading around $79,000 earlier this week even as oil prices jumped past $100, proving that crypto hasn’t been acting like a simple hedge against oil risks.
If Hormuz shipping genuinely normalizes and oil falls, some inflation pressure could ease, weakening the Fed’s case for further tightening and improving the outlook for rate-sensitive assets.
However, traders shouldn’t assume the talks mean the strait is reopening just yet, as the negotiations can always fail.
Related: US Says It Destroyed 10 Iranian Tankers: What It Means for Oil Prices
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