In late February, before the dramatic escalation in the US-Israel war against Iran, the price of Brent crude oil was trending around $70-$75. This was described as “normal”, especially as it had also been the average price range over the past 25 years. The highest annual average price since 1990 was $111 in 2016.
The price has since soared to $119 and then pulled back below $100 on signals of a possible de-escalation of the war.
Markets always react to “signals”, however unreliable. Indeed, markets (not being rational beings) may perceive signals where there are none.
In the case of the war against Iran, it is very difficult to see how it will end. US President Donald Trump seems intent on bombing Iran “back to the Stone Age”, to use the odious term attributed to US General Curtis LeMay regarding North Vietnam. Beyond that, it is not at all clear what Trump’s war aims are.
He can hardly claim victory if there is no popular revolution and if Iran chooses a new leader not approved by him — which it already has. In an interview with CBS News on Monday, Trump declared: “I think the war is very complete, pretty much.” On the same day, he told Republicans in Florida that “we could go further, and we’re going to go further”.
These are not normal leaders or normal times, and there are no genuine signals of a return to a normal oil price.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.