One day one day ceasefire everyday the world economy is worsening
So, let's get straight to it, because what happened in the markets over the past few days has been one of the most remarkable developments we've seen this year.
On Thursday, Brent crude was trading above $100 per barrel. The U.S.-Iran conflict had escalated again, the Strait of Hormuz was effectively closed, and everyone was bracing for the worst.
And then?
On Monday, Brent plunged 8.7% in a single trading session. It was the largest daily drop in more than three months. Then yesterday, it fell even further.
Yes. The exact same story produced two completely opposite market reactions within just a few days.
WHAT HAPPENED WITH THE WAR
On Friday, the United States halted its strikes against Iran after roughly two weeks of attacks. Iran, for its part, stopped retaliatory actions against Gulf countries.
But pay attention. Nothing was formally signed. Tehran even denied reports claiming it had agreed to a ten-day ceasefire. They simply stopped attacking each other.
Trump spoke to Fox News and put it in his usual style.
"I think we're in a very strong position right now," he said.
He repeated his threat to bomb Iran's major bridges if no agreement is reached. But he immediately added:
"If I can avoid it, I'd like to avoid it."
And regarding the Strait of Hormuz?
"Iran doesn't control the Strait. We control the Strait. They can throw a couple of mines in there and make a mess of things, but we control the Strait."
The U.S. has also reimposed a naval blockade to prevent ships from docking at Iranian ports.
"But why did they suddenly stop?" you might ask.
Reports emerged suggesting that U.S. ammunition stockpiles were beginning to run low. Trump had told Axios that he was considering a "massive attack," but according to The New York Times, those plans were shelved because of inventory concerns. Trump denied that claim and insisted the military has "plenty" of ammunition.
DIPLOMACY AROUND THE STRAIT
This is where things get even more interesting.
Over the weekend, negotiators from Oman traveled to Tehran. Yesterday, Iranian Foreign Minister Abbas Araghchi held separate phone calls with his Saudi and Omani counterparts.
Iran's Foreign Ministry emphasized the need to "eliminate the insecurity imposed on the Strait of Hormuz by U.S. aggression."
According to reports, Oman presented Iran with a proposal backed by Gulf states. The key word is: "voluntary."
What does that mean?
Instead of Iran imposing mandatory transit fees on ships passing through the Strait, vessels would pay voluntary contributions.
A similar arrangement already exists in the Strait of Malacca, where Indonesia, Malaysia, and Singapore encourage shipping companies to contribute toward navigation safety, environmental protection, and rescue operations.
If this framework gains traction, it could unlock much more.
A deal on the Strait could pave the way for formal negotiations over Iran's nuclear program and potentially bring an end to a conflict that has now lasted five months.
And here's the contradiction.
Trump described the talks as "good discussions."
Tehran continues to deny any direct negotiations, saying only that messages are being exchanged through intermediaries.
Meanwhile, speaking at a rally in Michigan, Trump said:
"You can't bribe them. You have to beat them. And we're going to crush them. But we'll see how things develop. Right now, there are very friendly negotiations taking place."
"Very friendly negotiations" and "we're going to crush them" in the same statement.
Worth noting.
THE SHOOTING HASN'T STOPPED
And here comes the big "but."
Saudi Arabia announced that it intercepted "multiple" drones launched from Iraq targeting oil facilities.
The Houthis in Yemen claimed responsibility for drone attacks on Saudi infrastructure.
Iraqi militias did not claim responsibility.
Meanwhile, the Jordanian military also shot down a drone within its airspace.
Satellite imagery showed smoke at several Saudi energy facilities. Riyadh has not yet commented on any potential impact on production.
At the same time, the Houthis warned ships against calling at Saudi ports.
The result?
Traffic at Yanbu, Saudi Arabia's main oil export terminal on the Red Sea, has nearly dried up.
Empty tankers are now heading to Egypt's Sidi Kerir terminal on the Mediterranean coast to load Saudi crude instead.
At least eight tankers have already declared Sidi Kerir as their destination through mid-August.
And what about Hormuz?
Very few ships appear to be moving through the Strait, at least with their transponders switched on.
Some vessels may have crossed with tracking systems turned off, meaning nobody knows exactly how much oil is currently flowing through the region.
HOW THE MARKETS REACTED
Now for the main event.
After Monday's 8.7% drop, Brent fell another 3.9% yesterday to $84.91 per barrel.
U.S. benchmark WTI declined 3.3% to $79.87.
Stocks moved higher.
"But why did oil fall so much if the Strait hasn't fully reopened?"
That's the right question.
The move appears to be driven far more by positioning and market psychology than by any meaningful improvement in actual oil flows.
And the analysts?
As usual, they're divided.
Goldman Sachs believes Brent could fall to $80 by year-end if Hormuz fully reopens.
Macquarie warns that the market could face a surplus of 2 million barrels per day in the fourth quarter once a deal is reached.
OPEC+ is reportedly preparing to pause production increases after September.
Meanwhile, Commonwealth Bank of Australia warns that disputes over Hormuz could quickly reignite the entire crisis.
And don't forget the political angle.
Cheaper oil means cheaper gasoline.
That is very convenient for Trump because, broadly speaking, Americans are opposed to the war, and the U.S. midterm elections are coming up in November.
