ATFX: Trump escalates threats against Iran, Tuesday is the deadline

Topic: ATFX Forex Column Submission

April 7th, ATFX: The US-Iran conflict has been ongoing for over a month since February 28th. Although the war continues, the market’s risk aversion sentiment seems to be weakening. International oil prices only showed a noticeable reaction during the first week of the US-Iran conflict; in the following period, international oil prices exhibited a stable sideways trend. Gold prices even declined during the US-Iran war, indicating that international funds have not flooded into the gold market out of panic.

This Monday, Trump stated that if Iran does not reopen the Strait of Hormuz by 8 p.m. Eastern Time on Tuesday, the US will destroy Iran’s power plants and bridges. Power plants and bridges are civilian facilities; if US bombings cause disruptions to Iran’s electricity and transportation, it could indirectly lead to a humanitarian disaster.

Such acts of bombing civilian facilities cannot be considered an escalation of the situation; rather, they reveal a strategy of using any means necessary. The more the US seeks to quickly end the war with Iran through special measures, the more it suggests that a peace agreement between the US and Iran could be imminent.

Pakistan, acting as an intermediary, is drafting a ceasefire agreement between the US and Iran. Iran’s core demands are to stop the war and lift sanctions; the US’s core demand is for Iran to cease uranium enrichment. US President Trump commented on this: “Although it’s not enough yet, they have taken a very important step.”

We believe that the probability of the US and Iran reaching a ceasefire agreement before Tuesday is very low, but the trend is positive. Iran has shifted from outright refusal to negotiate to proposing conditions. Although communication between the two sides is slow and indirect, it is still better than previous confrontations. Of course, if Trump chooses to launch bombings on civilian facilities after Tuesday, the recent signs of easing could be instantly reversed.

For international oil prices, once the US and Iran reach a ceasefire, the Strait of Hormuz will soon be open for free navigation. The cost may be Iran collecting tolls, but it’s better than the current semi-blockade. Oil supply could quickly recover, and the likelihood of international oil prices falling back below sixty dollars is high.

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In terms of market trends, international oil prices have not yet responded to Trump’s latest remarks. The rally on April 2nd was not due to the US-Iran conflict but because Ukraine bombed Russian energy facilities with drones, potentially causing Russia to reduce output by one million barrels per day. Everything will be revealed after Tuesday; if Trump indeed launches attacks on power facilities, international oil prices could surge further. Currently, international oil prices are still within an upward channel. Whether rising rapidly or slowly, the bullish trend remains unchanged.