Investment bank Piper Sandler criticizes the "Iran Agreement" narrative: The possibility of continued paralysis in the Strait of Hormuz, oil prices expected to reach new peaks this summer.

Investment bank Piper Sandler expressed disbelief in the speculation about an imminent US-Iran agreement and informed clients that the Strait of Hormuz is likely to remain largely closed, leading to a new high in oil prices. According to a recent report from the bank's energy and macro team: "We believe the Strait of Hormuz is likely to remain largely closed in the coming months, meaning supply shortages will become more acute, and oil prices will hit new highs this summer." WTI crude oil futures have fallen since last Friday, but rebounded on Tuesday due to mixed messages over a possible US-Iran agreement during the long weekend. The US military stated that it conducted "defensive strikes" in southern Iran, targeting missile launch sites and ships laying mines in the Strait of Hormuz. Prior to this disclosure, President Trump had stated on Saturday that an agreement with Iran was "essentially negotiated" and details would be announced soon. Meanwhile, the Iranian Foreign Ministry warned that navigation through this vital waterway "will come at a cost." Piper Sandler stated that they have no confidence in whether commercial traffic volumes through the strait can return to pre-crisis levels of 50% next week or next month. The report mentioned that the US has been "reluctant to escalate militarily" as Iran's retaliatory measures could have wider implications for neighboring countries and further disrupt global supply chains. The bank also believes that Iranian leaders are unwilling to compromise as they believe they hold leverage, heightening concerns that the strait closure could be prolonged for months. Multiple economies in the Middle East, Asia, and Europe heavily rely on transportation through the strait, especially for exporting oil and liquefied natural gas (LNG) from the Middle East to Asia. The narrow channel that once carried about one-fifth of global seaborne oil shipments has witnessed a historic drop in traffic levels since the conflict escalated, with vessel traffic plummeting close to zero. At the onset of the conflict, WTI crude oil futures approached $120 per barrel, but recent trading prices are around $94 per barrel. If Piper Sandler's prediction of a new high in oil prices materializes, it will have significant repercussions on the global economy and erode the stock market rebound from wartime highs.