Wildest day for oil ever
A Financial Times podcast discussing the volatile market reactions to escalating Middle East tensions, focusing on oil price swings and Trump's apparent attempt to de-escalate. Oil prices spiked dramatically before falling back as markets interpreted Trump's signals that he was looking for an exit from the conflict.
Summary
This episode of the Unhedged podcast examines the extreme market volatility following Middle East military tensions, with hosts Katie Martin and Robert Armstrong analyzing what they call potentially the 'wildest day for oil ever.' The discussion centers on oil prices that jumped from mid-80s to $119 overnight before falling back to $86, driven by fears of supply disruption through the Strait of Hormuz, which handles a fifth of global oil supply. The hosts explain that markets interpreted Trump's Monday comments as signaling his desire to exit the conflict, leading to the acronym 'TACO' (Trump Always Chickens Out) among investors. However, they emphasize that Trump doesn't control all parties involved, particularly Iran and Israel. The podcast delves into technical aspects of oil futures markets, showing that while immediate delivery prices went 'bananas,' longer-term contracts remained relatively stable, indicating market expectation that disruptions would be temporary. Gas prices in the US rose 16% in a week, reaching $3.50 per gallon, creating political pressure. The market reaction wasn't a typical 'risk-off' move into safe havens, but rather profit-taking on successful recent trades. European and UK markets were hit harder due to greater energy dependence, with UK short-term debt markets experiencing violent swings as rate cut expectations shifted to rate hike pricing. The hosts conclude with uncertainty about whether the crisis is truly over, noting that oil traders called it the craziest week they'd ever experienced, even compared to COVID-era negative oil prices.
About this episode
<p>Over the weekend, the price of oil had its biggest intraday swing on record, bouncing between $84 and $119 per barrel in just 23 hours. Today on the show, Rob Armstrong and Katie Martin survey the wreckage, and try to figure out if the price of oil is driving policy in Washington. Also they go long neckties and Korean food crazes. </p><br /><p>For a free 30-day trial to the Unhedged newsletter go to: <a href="https://www.ft.com/unhedgedoffer" rel="noopener noreferrer" target="_blank">https://www.ft.com/unhedgedoffer</a>.</p><br /><p>You can email Robert Armstrong and Katie Martin at <a href="mailto:[email protected]" rel="noopener noreferrer" target="_blank">[email protected]</a>.</p><br /><p><a href="https://www.ft.com/content/90395966-36d5-48ae-af7d-2dfcd1638625?" rel="noopener noreferrer" target="_blank"><strong>Read a transcript of this episode on FT.com</strong></a></p><hr /><p style="color: grey; font-size: 0.75em;"> Hosted on Acast. See <a href="https://acast.com/privacy" rel="noopener noreferrer" style="color: grey;" target="_blank">acast.com/privacy</a> for more information.</p>
Key Insights
- Oil traders described this as the wildest week in trading history, even more extreme than when oil prices went negative during COVID lockdowns
- The futures curve showed historic steepness with front-month oil prices spiking while longer-term contracts remained stable, indicating markets expected only temporary disruption
- Market reactions weren't typical 'risk-off' moves but rather profit-taking on successful trades, with investors selling assets that had performed well recently rather than fleeing to safe havens
- UK and European markets suffered more than US markets due to greater dependence on Middle Eastern oil, with UK short-term debt markets violently repricing from expecting rate cuts to pricing in rate hikes
- Despite Trump signaling desire to de-escalate, the hosts argue he doesn't control all parties involved, making the situation's resolution uncertain since Iran and Israel retain agency in the conflict
Topics
Transcript
From globalization to innovation, sustainability to market volatility, there's always more than one side to a story. Explore different perspectives on today's most important business and economic issues with the Flipside podcast from Barclays Investment Bank. Hear two research analysts in a lively debate and get insights from every angle to further inform your view. Listen to the Flipside on your favorite platform. Pushkin. Very complete or still underway? The answer? You could say both. Confused? Well, welcome to the club. But investors seem pretty sure they've spotted a taco. T-A-C-O, you guys. Trump always chickens out. Oil prices have dropped back and stocks are picking up. Today on the show, what do investors really make of this war? And…
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