Everyone Is Waiting for the War to End, But Does the Oil Price Suggest a Long-Term Conflict?
This article argues that the market views oil price volatility as a consequence of the ongoing conflict, but the real insight is understanding how the war itself is being priced through oil.
With the Strait of Hormuz blocked, global crude supply is being restructured, with Asian buyers shifting to US oil, causing WTI to surpass Brent—a sign of structural changes in pricing and trade flows. While short-term price differences can be explained by contract timing, the deeper issue is a fundamental shift in who can supply oil.
The market's key misjudgment is not on price, but on time. Futures curves still imply the conflict will end soon and supply will recover. However, the more likely path is a prolonged war of attrition. This means high oil prices are not a temporary shock but a new structural reality, with a range of $120-$150.
In this framework, oil is no longer just a commodity but the "upstream variable" for all assets. Its repricing will ripple through interest rates, currencies, equity, and credit markets.
The market has priced in the war's occurrence, but not its persistence. The analysis concludes that a prolonged conflict is the base case scenario, and any pullbacks in oil prices present an opportunity as the market has yet to fully price in a long-term disruption.
marsbit04/07 07:30
