[MARKET ANALYSIS] Oil rises as escalating US-Iran tensions outweigh diplomatic hopes

Crude futures are firmer following several escalatory updates overnight and in the European morning. To recap, US CENTCOM confirmed the US military completed its 11th night of airstrikes against Iran. Iran retaliated by launching drone attacks targeting a US military base at Camp Doha in Kuwait, as well as locations in Bahrain and Jordan. On the diplomatic front, an Iranian Interior Ministry spokesperson said there is currently no ongoing negotiation, and it may only involve the exchange of messages. Further, Iranian lawmaker Qashqavi said US President Trump's claim about Iran's request for negotiations is not true. On Hormuz, the Iranian Army Commander-in-Chief says Iran controls the Hormuz Strait and will fire upon American forces. Further, the Houthis' maritime blockade against Saudi Arabia saw several tankers moving to avoid the Bab el-Mandeb Strait. If Bab el-Mandeb, voyages to Asia may only occur via the Suez Canal, which adds notable time and expenses. On that note, CMA CGM (the third-largest container shipping company globally) will impose an emergency fuel surcharge effective August 1 following the renewed escalation of hostilities in the Strait of Hormuz. WTI and Brent are higher by over 3.5% intraday at the time of writing, with Brent towards the top end of a USD 91.31-94.76/bbl range, while WTI resides towards the upper end of its 84.44-87.86/bbl band. The Middle East situation and soaring insurance costs have also prompted Dutch TTF to surge, with the front-month closer to EUR 62/MWh vs yesterday’s sub-EUR 60/MWh prints. Precious metals are firmer intraday but off worst levels, feeling opposing forces from higher oil prices and some technical factors after the yellow metal topped USD 4,100/oz. Spot gold trades between 4,076-4,141/oz at the time of writing. Spot silver is more contained between USD 58.73-60.06/oz. Base metals are mostly firmer to varying degrees, but copper gives back some recent gains amid the rise in oil prices and its subsequent effect on inflation and growth. 3M LME copper trades around the middle of a USD 13,769.00- 13,919.00/t parameter.