Just before the U.S. celebrated the Fourth of July, the government established a Memorandum of Understanding with Iran. The two countries set the steps required to reopen the Strait of Hormuz.
The MOU ended abruptly late last week. Iran established ship routes that must pass its side of the Strait. By firing on ships, the U.S. responded with missile attacks on Iran.
Consumers might look at June’s potentially moderating inflation on gas prices as temporary. After WTI crude prices jumped to around $80/bbl, investors flocked back to oil and gas stocks.
ConocoPhillips (COP), Exxon Mobil (XOM), and Chevron (CVX) are the biggest energy firms to watch. Devon Energy (DVN), BP, Shell Plc (SHEL), and Occidental Petroleum (OXY) will likely have more near-term upside. Those stocks fell last month when markets mistakenly thought the U.S. Iran conflict would end.
Between February and June, oil prices fell more than the experts thought they would. China dramatically cut oil demand. That helped prevent an oil crisis in East Asia. China may repeat a draconian order to limit energy demand. But if markets do not believe that the Strait of Hormuz will return closer to pre-war traffic, oil prices will likely climb higher.
Experts incorrectly thought that WTI crude prices would jump to $150/bbl. This time, an extended conflict would suggest a target of $80.00/bbl - $100.00/bbl is possible.
