For the first time in four months, oil prices in the United States fell by US$ 68.5 per barrel, largely returning to the level before the escalation of tensions in the United States and Iraq. The risk premium, which had previously been pushed up by geo-related conflicts, had shrunk significantly with the current cycle.
Risk premium vomiting.
This decline means that the additional premiums previously recorded by the market for the situation in the Middle East are retreating. After oil prices returned to pre-conflict zones, concerns about short-term supply disturbances in the energy market diminished.
In terms of price performance, the fall in crude oil also reflects a cooling of risk avoidance. For macro-markets, this usually has a direct impact on inflation expectations, especially in the price transfer of energy-related projects.
Inflationary pressures or abating them
Lower oil prices usually help to lower energy and transport costs. If this trend continues, cost pressures on both the consumer and the enterprise sides may be mitigated.
This also means that United States inflation data may be followed up with some support. Continued fall in energy prices may help to cool down overall prices.
- Reduced energy costs to help reduce inflationary pressures
- Transport costs fall, which may drive some of the commodity costs Okay.
- The market began to re-evaluate the next interest rate path.
The market turned to the Fed.
As oil prices lag behind, the focus of the market is shifting towards the soon-to-be-published inflation data and the subsequent policy signals of the Fed. If wider inflation continues to cool down, the Fed may have greater operating space for interest rate arrangements.
Next, the maintenance of low energy prices and the simultaneous slowdown in core inflation will be important points of observation for the direction of policy in the market.