WTI crude prices are trading at an unusually weak momentum. Through its recent V-shaped rebound, markets chose to believe that the U.S. peace talks with Iran in Pakistan would go well. Last weekend, negotiations lasting 11 hours did not end well. In the last week, the U.S. government hinted at restarting talks.
In mid-week trade, WTI crude prices strengthened. Yesterday, crude oil prices strengthened to trade at around $94. Last night, crude oil futures gained. The U.S. said it would expand its blockage of all ships, regardless of nationality, around Iran.
Investors should continue to watch for Exxon Mobil (XOM) and ConocoPhillips (COP) bouncing back from their downtrend. Shares fell throughout this month on hopes that the Strait of Hormuz would return to normal operations.
Military contractors fell on Thursday. General Electric (GE), RTX (RTX), Howmet Aerospace (HWM), and Lockheed Martin (LMT) declined. LMT stock is becoming a particularly attractive holding. Shares peaked at nearly $700 in March but closed at $607.49.
Stock markets are pricing in no further military actions against Iran. Assuming that the U.S. does not carry out new bombings, aerospace and drone suppliers might continue to trend lower.
Your Takeaway
Energy markets are not pricing in the impact of Strait’s closure. With oil cargo ships unable to pass, countries that need it will need to pay considerably more. That might cause a global oil crisis that keeps inflation rates at elevated levels.
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