[MARKET ANALYSIS] Energy gaps higher amid US-Iran flare-up, but off best levels amid a lack of further fire

Over the weekend, tensions between the US and Iran escalated after US forces struck IRGC missile and minelaying capabilities on Larak Island, prompting Iran to retaliate with missile and drone attacks against US and regional military targets. Further, Iran reported striking a tanker with mines, downing a US drone and targeting US vessels, while both sides exchanged warnings of further retaliation. President Trump reiterated that Iran cannot obtain nuclear weapons, while Washington is also intensifying economic pressure through additional sanctions. Despite the escalation, Iranian leaders said they do not seek war and remain open to regional cooperation, whilst also warning of a decisive response to further attacks. WTI Oct and Brent Nov futures gapped higher at the open after the US and Iran resumed strikes for the first time in over a month. The contracts are firmer by around 2% at the time of writing but off highs, with USD 84.11-86.02/bbl and USD 86.89-88.72/bbl ranges respectively, with the likely cause of the pullback potentially the lack of further US-Iran firing. Dutch TTF surged by some 4% intraday and tested EUR 70/MWh this morning. “Tight supply entering the heating season leaves the market vulnerable to spikes higher later in the year”, ING says. Metals are flat/mixed with the complex somewhat cushioned by the softer USD despite the backdrop of higher energy prices. Spot gold moves closer to its 100 DMA to the downside (USD 4,370/oz) after dipping under Friday’s low (4,445/oz) to trade in a current USD 4,396-4,472/oz range. 3M LME copper trades in a narrow USD 14,223.68- 14,388.55/t.