Crude oil surges on renewed Hormuz concerns

Today’s headlines

What’s happening: Crude oil prices rose sharply this morning with a reescalation of geopolitical concerns in the Middle East.

What happened: Iran reasserted their control over the Strait of Hormuz, saying the US had violated the ceasefire agreement.

Meanwhile, strength in the US dollar limited gains for crude oil this morning.

Why it matters: Last week, US President Donald Trump had indicated progress toward reaching a deal with Iran, while Israel and Lebanon also agreed to a 10-day ceasefire. Tehran announced the opening of the Strait of Hormuz, exerting pressure on oil prices on Friday. The Strait of Hormuz was responsible for around 20% of global oil supply before the beginning of the conflict.

More than 20 ships crossed the Strait on Saturday, the highest number passing the waterway since March 1.

On Sunday, Trump said that US military had seized an Iranian-flagged vessel looking to breach its blockade. Iran argued that the US blockade violated the ceasefire agreement, after it had agreed to open the Strait of Hormuz.

Oil prices rebounded this morning on news of the Strait of Hormuz being closed again, after the US and Iran accused each other of violating the ceasefire agreement.

Despite rising momentum towards a peace deal being reached and Trump saying that a US delegation would travel to Pakistan today for a second round of talks with Iran, investors grew concerned about the success of peace talks amid mistrust between the two nations.

Strength in the US dollar exerted some pressure on crude oil prices this morning, as a higher greenback makes commodities more expensive for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose around 0.3% to 98.36.

Spot prices for WTI crude oil jumped 4.2% to trade at $90.90 per barrel, while Brent crude prices gained 3.5% to $96.55 per barrel this morning.

In other commodities trading, natural gas prices rose 1.4% to $2.712, while gasoline climbed 3.7% to $3.1169 and heating oil surged 6.3% to $3.5105.

What to watch: Investors will keep an eye on the ongoing developments related to US-Iran war.

Data in US EIA (Energy Information Administration) crude oil stocks change will be released on Wednesday. US crude inventories, which declined by 913,000 barrels to 463.8 million in the week ended April 10, are expected to fall by 1 million barrels in the latest week. Gasoline inventories fell by 6.3 million barrels to 232.9 million, while distillate stocks contracted by 3.1 million barrels to 111.6 million during the week.

The markets today

The Canadian dollar in focus today ahead of a basket of major economic reports

Context: The Canadian dollar slipped versus the US dollar this morning mainly due to strength in the greenback.

Details: The Canadian dollar weakened on Friday following a sharp decline in prices of crude oil, one of Canada’s major exports, after Iran announced the opening of the Strait of Hormuz to commercial vessels.

However, tension escalated again over the weekend after both the US and Iran accused each other of violating their ceasefire agreement.

Meanwhile, data released on Friday showed housing starts in Canada declined by 6% to an annual rate of 235,900 in March. This came in below market estimates of 255,000 and marked the lowest rate in five months.

Canada’s CFIB Business Barometer long-term index rose to 58.5 in April, from a reading of 55.7 in the previous month.

Strength in the US dollar exerted pressure on the loonie this morning. The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose around 0.3% to 98.36.

The USD/CAD forex pair rose around 0.1% to 1.3701 this morning.

What to watch: Investors will continue monitoring developments in the Strait of Hormuz, which are expected to provide further direction to the Canadian dollar ahead.

Data on Canada’s inflation rate (1630 UAE Time), Bank of Canada’s business outlook survey (1830 UAE Time) and BoC survey of consumer expectations (1830 UAE Time) will be released today. Canada’s headline inflation rate, which declined to 1.8% in February from 2.3% in the previous month, is expected to rise again to 2.5% in March. Analysts expect the Consumer Price Index to rise by 1.1% in March after gaining 0.5% in February.

Other Markets: US trading indices closed higher on Friday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 1.79%, 1.20% and 1.29%, respectively.

The news shaping the markets

Ukraine claimed that Russia had conducted a massive assault, launching over 200 drones targeting several regions across the country. The news sent the USD/RUB pair lower in forex trading this morning.

Eurozone’s trade surplus shrank to €11.5 billion in February from €23.1 billion in the year-ago period. The latest reading coming in below market estimates of €11.7 billion exerted pressure on the EUR/USD forex pair.

The People’s Bank of China kept its key lending rates at a record low level for the 11th month in a row, which sent the USD/CNY pair higher in forex trading this morning.

Malaysia’s economy grew by 5.3% year-over-year in the first quarter, easing from 6.3% in the previous quarter, which lent support to the USD/MYR forex pair.

New Zealand recorded a trade surplus of NZ$0.70 billion in March, versus a year-ago deficit of NZ$0.79 billion. However, the NZD/USD pair slipped in forex trading this morning.

What else to watch today

Italy’s construction output (1200 UAE Time), Eurozone’s construction output (1300 UAE Time), India’s infrastructure output (1530 UAE Time), Turkey’s central government debt (1800 UAE Time) and Argentina’s balance of trade (2300 UAE Time).