After several weeks with the U.S. indicating a desire to end its war with Iran, WTI crude prices fell steadily. The lower highs formed a downtrend.
In the last week, WTI crude prices dropped at a faster rate. The drop from $77/bbl to $69.93/bbl likely caught even the bearish investors off-guard. At this rate of decline, when will the energy price bust end?
Oil is a commodity much like gold (GLD) and silver (SLV). Both of those metals fell in a similar pattern: slow, and then fast. Investors also sold oil and gas integrated firms like Exxon Mobil (XOM), Devon Energy (DVN), BP plc (BP), and midstream firm Enterprise Products Partners (EPD).
Experts previously predicted that oil prices would trade in the $70/bbl range by the end of the year. If that forecast is accurate, energy investors should expect that the energy bust is nearing an end.
The aerospace and defense industry is pricing in an end to the Iran war. AeroVironment (AVAV) and Leidos (LDOS) fell disproportionately more than the sector. RTX (RTX), for example, is still trending upward. Markets believe that the U.S. will increase spending on military equipment to replenish its stockpiles.
The end of the conflict created a downturn in oil prices that few expected would play out so quickly. Any violation of the peace agreement might give crude prices a temporary lift.
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