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Dire Straits
- Following a further week of uncertainty in relation to the Middle East conflict, including hints of a ceasefire deal, markets have continued to grind lower, and oil prices move higher.
- This week, the French Government indicated that 30–40% of Gulf refining capacity has been damaged or destroyed by Iran’s retaliatory strikes, leaving a shortage of 11 million barrels a day on global oil markets.
- Nevertheless, futures markets continue to price in oil falling to $84/barrel by end‑2026 and $72 by end‑2027.
- Overall, the truth could lie somewhere in between the scenarios suggested by current energy and interest rate market pricing, but is worth nothing that the economy is in a very different cyclical position compared to 2022.
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