Oil Prices Snap Back After Tehran Denies Hormuz Strait Talks

Equities rallied last week on conviction that a US–Iran/Oman deal to reopen the Strait of Hormuz was imminent; Tehran spent the weekend denying direct talks, and oil snapped back today. Markets are re-pricing geopolitical risk they had prematurely discounted.

Key terms explained:

West Texas Intermediate (WTI): The US benchmark crude used to price contracts in the United States.

Brent crude: The North Sea benchmark used to price most global oil exports.

Strait of Hormuz: A waterway between the Arabian Gulf and the Gulf of Oman carrying about one fifth of the world’s oil.

Naval blockade: A military or economic measure preventing ships from reaching or leaving a country’s ports.

Transit fees: Charges levied on vessels for passing through a waterway under a state’s jurisdiction.

Geopolitical risk: The likelihood of political or military tension feeding directly into energy prices.