Unpicking the energy market implications of the ceasefire

Energy prices plunged following the announcement of the ceasefire earlier in the week, but the fragile status of the truce and the fact that very few ships have passed through the Strait of Hormuz in the meantime have caused prices to creep back up since. Our proprietary indicator based on the options market shows that traders are still putting a 20% chance of triple-digit Brent in three months’ time, down from a 35% chance two weeks ago. Looking ahead, Iran’s efforts to control shipping through the Strait of Hormuz will encourage the region’s producers to expand and to explore alternative export routes in the future.