Crude commentary: What is Trump going to do?

Peter Corey, Chief Market Strategist at Pave Finance, says it’s difficult to imagine a clean outcome, given the tariffs Iran is pushing on boats going through the Strait of Hormuz.

 
He believes that if Trump goes ahead with the attack, the key will be to watch one-year futures prices, as this is where institutional hedging takes place.

In the case of a deadline extension, the markets will probably use a short-term relief rally to liquidate at better levels, due to the consensus expectation that the administration will likely shift strategies.
 
Peter Corey, Chief Market Strategist at Pave Finance, comments:
 
“If Trump decides to go ahead with his plan, many will be watching spot crude prices. However, the key will be to zoom out and watch one-year futures prices, as this is where institutional hedging takes place.

“To buck the upward trend, June 2027 futures will need to break the $68 level. For reference, they were hovering near the $60-62 range in the week leading to the war, reaching a high of $75 on March 20^th before dropping to $68 last Thursday, as hopes rose around potential negotiations. Although front-month crude futures are making new highs, the all-important June 2027 WTI futures are just below $72.

“It is very difficult to imagine a clean outcome, given that Iran is pushing for tariffs of $2 million per ship passing through the Strait of Hormuz, which puts Trump in an awkward situation, given this tariff was non-existent before the war. Due to this, I expect the US will opt to continue the campaign in the hopes of capitulation by the Iranian regime.

“In the case of a deadline extension or prolonged ceasefire, the markets would probably use what could be a short-term relief rally to liquidate at better levels, due to the consensus expectation that the administration will likely shift strategies in the future.”