Speaking to ET Now, market strategist Ed Yardini from Yardini Research said that the biggest factor driving the oil market sentiment is uncertainty over the reopening of the Strait of Hormuz. “Well, of course, most of the Strait of Hormuz is. Right now, it’s effectively closed and everyone is trying to guess when it will reopen.”
According to Yardini, stability will largely depend on how quickly the fighting subsides and whether the threat to tanker traffic diminishes. “Until Iran admits or admits it has lost the war, the missiles and drones will continue to fly in the Middle East.” He added that clear signs of normalcy would emerge only when the ships started moving safely through the strategic passage. “I will be very optimistic when I see a few tankers passing through the strait without incident.”
Financial markets have also been rattled by mixed signals from Washington on whether the US Navy will protect oil tankers in the strait. Such statements and subsequent denials have caused sudden fluctuations in both crude prices and global stocks. Yardini noted that although Iran’s ballistic missile capabilities are limited, drone strikes could still pose a major threat to naval operations in the region.
“Yes, drones can do a lot of damage and can effectively continue that ban.” He also pointed out that risks to boat operators and crew members remain significant. “Even if you can get insurance, you probably don’t want to expose your tankers to that kind of risk.”
Looking ahead, Yardini warned that markets may be underestimating the uncertainty surrounding the conflict. “It is a dangerous situation and there are still many surprises that can happen. This is the darkness of war.” For now, he believes investors are largely betting on a favorable outcome. “The market has chosen to discount the best outcome – a short war and an open Strait of Hormuz with oil flowing.”
The International Energy Agency has indicated that its member countries could release additional supplies if the disruption worsens, a move aimed at calming the market in the short term. However, Yardini warned that such measures would provide only temporary relief if the geopolitical situation fails to stabilize. “Fuel from strategic oil reserves can help in the short term, but if the war doesn’t end soon, it won’t help much.” For investors around the world, the direction of oil prices — and the extension of financial markets — may ultimately depend on whether tensions ease enough to allow safe passage through the world’s most important energy corridors.
