Uncomfortably, the price of Brent crude has steadied at about $95 per barrel, and no one is quite sure how long it will stay there. The analysts at Standard Chartered are referring to it as the “new equilibrium,” which is a polite way of suggesting that the market is no longer acting as though this is only temporary. Brent for June delivery has moved through that threshold on eight of the previous nine trading days. In between Trump’s threats and Iran’s seizures, the market keeps going back to what feels less like a price and more like a holding pattern.
The remarkable thing is how fast $95 has become commonplace rather than surprising. This would have prompted emergency meetings in European capitals a year ago. It’s only Tuesday now. There’s a feeling that homes, governments, and traders have all quietly decided to put up with it, at least for the time being, as everyone watches to see if the truce lasts or breaks down into something worse. The Strait of Hormuz, which typically transports around 25% of the world’s gas and oil, has turned into a chokepoint that people watch in the same way they used to watch interest rate decisions.
The clear winners aren’t being timid. Two years ago, it would have been unimaginable for Gulf producers whose infrastructure survived the strikes to generate income at this rate. Brazil just reported a record $14.2 billion trade surplus while comfortably avoiding the conflict. The typical culprits, Exxon, Shell, and BP, are witnessing an increase in cash flow despite fluctuating output levels. Long ridiculed for being overly conservative, American shale producers are stealthily increasing their output to 13.61 million barrels per day. It’s difficult to ignore the fact that the same governments that chastised these corporations in the early 2020s are now courting them.
The losers are undoubtedly more numerous and quieter. Airlines have suffered greatly; on the day that Trump announced the ship seizure, IAG, Wizz Air, and Ryanair all saw significant declines. The 20.1% increase in diesel estimates is the kind of figure that rearranges household budgets but doesn’t make headlines. Everyone who converts oil into anything else, including manufacturing and trucking businesses, absorbs what they can and distributes the remainder. Fears of a protracted Hormuz closure caused European stock markets to plummet, the FTSE to lose 0.6%, and UK gas prices to slightly increase.
The way oil prices presently fluctuate with every Trump press conference has an almost theatrical quality. Brent momentarily surpassed $109 on April 1st following his pledge to strike Iran “back to the Stone Ages.” It descended again. The seizure of an Iranian warship on April 20th caused it to rise once more. The forward curve, on the other hand, presents a more tempered picture. The five-year Brent at $70.13 indicates that the market still believes in ultimate normalcy, but not anytime soon. Because nations are now storing strategic reserves in the same manner that families hoarded toilet paper in 2020, Standard Chartered believes that prices will remain $10–$20 above pre-conflict levels long after the shooting ceases.
It’s tempting to refer to this as an oil shock as it develops, but it doesn’t feel like 1973 or 2008. It seems more deliberate, slower, and more political. The market is more resigned than terrified. The headline that appears tomorrow morning will likely have a greater impact on whether $95 holds or tips toward something worse than supply and demand.
