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Oil futures were heading for a third straight weekly decline on Friday when President Donald Trump confirmed that Iran had violated its cease-fire agreement with the United States — attacking a ship in the Strait of Hormuz, the narrow chokepoint through which a large portion of the world's seaborne crude must pass.
The incident has led some analysts to conclude that the recent sell-off in oil prices has overshot, moving too far, too fast given the renewed geopolitical risk now on the table.
A Cease-Fire That No Longer Holds Trump's confirmation that Iran breached the terms of the cease-fire deal by striking a vessel in the Strait of Hormuz introduces a material supply-risk premium that markets had, until Friday, been slow to price in.
Three consecutive weeks of losses suggest traders had been leaning heavily on demand-side pessimism or diplomatic optimism — or both.
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