Brent and Crude oil prices have fallen almost 20% in a month after the ceasefire announcement and the opening of the Strait of Hormuz. Despite some progress, the US-Iran peace deal remains the biggest concern for Wall Street as the negotiations are tenuous, and the process is extending beyond the imagined timeline. This is adding extra pressure on the global market, which is trying to recover from the February slump.
This uncertainty is causing volatility in the broader markets, despite oil prices slumping towards the $70 level. Leaders from both sides are prone to delivering blitzkrieg statements if the negotiations don’t go their way. This has kept the global markets on their toes, as the flipside is a costly affair. The markets are still reeling from the conflict, and the final peace deal is still in the making. It could take longer for the US and Iran to ink the deal, as both sides are in disagreement.
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Declining Oil Prices Will No Longer Lift the Markets Up
Ryan Sweet, the Oxford Economics Chief Global Economist, said that until a peace deal is finalized, the stock market will remain volatile even if oil prices further drop. “A peace deal that holds would produce a cascade of easing conditions: energy disinflation, central bank optionality, looser financial market conditions and relief for emerging markets,” Sweet wrote to clients on Monday. “However, an agreement without a follow-on peace deal would be volatile and impossible to sustain.”
The dots need to be connected without any loose ends to keep the markets from falling. Every knot is linked to the peace deal, and is no longer about the prospects of oil prices. “All these risks are connected,” Sweet wrote. “The key question is how the peace deal in the Middle East unfolds.” The goalpost for signing the peace deal has been moving back and forth for two months.