Speaking to ET Now, Richard Yetsenga from ANZ Group said the current reaction in oil markets appears to be largely emotional rather than purely driven by fundamentals.
“Oh, it is definitely a knee-jerk reaction. Whether it is sustained or not depends on what actually happens with the conflict. And there is this catch-22 the market is probably in. In one sense the market is saying well the fundamentals look quite poor, 20% of oil through the Strait of Hormuz, it is not operating, that is very bullish for the oil price. On the other hand, implications for the US economy from that are quite poor, inflationary pressure high, gas prices pressure on consumers, political pressure back on President Trump. Does he then back off the military action because of the impact of oil and I think the last 24-48 hours in markets you have seen both sides of this story,” Yetsenga said.
The disruption around the Strait of Hormuz — one of the world’s most critical oil transit chokepoints — has heightened concerns across energy-importing economies, particularly in Asia. With many countries heavily dependent on imported crude, the sudden surge in prices is already forcing governments to consider emergency responses.
Yetsenga noted that most Asian economies are particularly vulnerable because they rely heavily on imported energy.
“Well, you have talked through it right there. Apart from Malaysia, the region is a collection of oil importers and energy importers and that puts them in a very difficult position at the moment. We are only eight or nine days into this conflict, already we are talking about the release from strategic petroleum reserves at a global level, even in some individual economies and then also some sort of supply rationing and already there are challenges with diesel and jet fuel particularly in different parts of the region. This goes into if you like exhibit A) the economic impact of this is potentially quite severe if it is sustained and of course we should be worried about that, but also that economic impact is going to put pressure on the offensive side of this conflict,” he said.Governments across the region have begun taking precautionary measures. South Korea, for instance, has discussed limits on fuel consumption, while other countries are leaning more heavily on strategic reserves to cushion the immediate supply shock.Despite the intense market speculation that the conflict could end quickly, Yetsenga remained cautious about predicting the timeline of any resolution.
“Sorry, I am not a military strategist. I am not a political expert, that is question for those sorts of people….” he said when asked about expectations of an early end to the war.
However, he acknowledged that financial markets themselves may eventually play a role in shaping political decisions.
“Look, my view is that the pressure that markets put on the administration will ultimately be a factor probably that brings this action to a conclusion. We are only eight days into this or nine days. In previous occurrences it has taken meaningfully longer than this for the Trump administration to back off. So, I think I know the endgame. But the timing honestly we should be transparent is really anybody’s guess,” Yetsenga said.
According to him, the likely outcome is a negotiated halt to hostilities once the United States declares its objectives achieved.
“Oh, the endgame is there is some sort of cessation of hostilities because the US says that we have achieved our objectives and markets will welcome that and go back to some sort of the normalcy that we had before this kicked off the week before last. But, of course, the normalcy also even this year has had Greenland and Cuba and a few other issues in there, so it is still a world which is unsettled but one in which we can be a bit more analytical about,” he added.
For investors and policymakers alike, the coming weeks will likely hinge on whether the conflict escalates further or begins to cool. Until then, energy markets — and the economies that depend on them — remain caught between geopolitical risk and hopes for a swift return to stability.
