Geopolitically speaking, what happens in the next few weeks will have important ramifications for the oil market for years to come.
In last week’s WCTW titled, “The Importance Of Fujairah And Why It Is An Inevitable Escalation Point For The Global Oil Market.” I explained that the scenario President Trump is pursuing is the following:
Scenario 3: Talks are ongoing, small strikes back and forth, and Trump is just trying to survive the midterms
This scenario is what’s currently unfolding. The US is using these 1 to 2 week strikes to temporarily knock out Iranian capabilities so it can conduct S2S to help buffer the global oil math. In the meantime, Trump is using his market moving powers to flush oil prices down using the same strategy of war on, war off, peace on, peace off.
So far, this strategy is working and it’s possible they can keep doing this dance until the midterms.
But for the Iranians, they also know that this is the playbook, which brings in the Fujairah card as an inevitability. If Iran does not play the Fujairah card during this window (August), then it will have lost leverage on the midterms and the oil math. Every day that goes by without enforcement in the Oman lane implies that Iran is losing leverage.
Logically, this means that Fujairah is next, which would pressure the global oil market like we’ve never seen before.
Over the weekend, Axios reported that Trump is trying to “low-key” the Iran conflict and let economic pain do its damage on Iran. From the US’s perspective, time is on its side.
Well, if you look at where WTI is trading today ($82), you would have to agree. The oil market today is in the twilight zone, and oil market participants have become Pavlov’s dog. Every time a bearish headline comes out, the price drop outweighs any escalation price rally.
Scott Bessent, the US Treasury Secretary, really worked his magic. Kudos for the best manipulation job on the planet.
And for those who are still in denial that the US is not manipulating the oil market, all you have to do is look at the headlines last week. Scott Bessent himself appeared on TV last Tuesday and said the Strait of Hormuz would reopen within hours or by Wednesday.
Well, is the Strait open?
It’s not open, and I suspect things are about to get a lot worse.