Oil Markets Hinge on Strait of Hormuz Diplomacy as US-Iran Conflict Escalates, Macquarie Says

Renewed US-Iran fighting lifted crude prices and placed the Strait of Hormuz back at the center of oil market risks, with diplomacy over control of the waterway likely to determine whether tensions ease or persist, Macquarie said in a Wednesday note. Unlike previous flare-ups, the latest conflict did not stem from the Israel-Hezbollah war and instead followed a broader US military response to Iranian attacks. Macquarie said the dispute over control of the Strait of Hormuz now poses the biggest obstacle to a lasting peace. Iran targeted vessels to discourage shipping from using alternative routes near the Omani coast after the US and its regional allies sought to reduce Tehran's leverage over the Strait by redirecting traffic away from Iranian-controlled transit channels, the note added. The firm said traders should closely watch whether diplomatic efforts can produce a compromise over control of the Strait of Hormuz, arguing that any breakthrough would determine whether the conflict subsides or develops into a prolonged standoff. Macquarie expects crude oil prices to remain the primary driver of broader financial markets, saying higher prices would likely support the US.