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The oil market runs the world, including the grain market, at the moment. And there’s likely a lot more volatility in store.
West Texas Intermediate crude futures came within a whisker of $120 a barrel on Monday before plunging back below $90 a barrel after President Donald Trump told CBS that the Iran was nearly complete. A dip below $80 a barrel followed on Tuesday after Energy Secretary Chris Wright, in a post on X, said the U.S. Navy had escorted a tanker through the Strait of Hormuz. But the social-media post then disappeared, and the White House later said no such escort had taken place. Oil still finished down 11% on the day but pushed back above $80, while Trump vowed to bring heavy retaliation if subsequent news reports that Iran was preparing to mine the Strait of Hormuz proved true.
It all reflects a market that’s driven “entirely by sentiment,” said Jeff Currie, head of Energy Pathways at private-equity giant Carlyle and former head of commodity research at Goldman Sachs, in an interview with CNBC. “I think the bottom line is the market is not recognizing the severity of the situation.”
He noted that betting markets favor the Strait, which typically accounts for 20 million barrels a day of crude transport, or roughly 20% of daily global consumption, remaining largely closed through the end of the month – a “catastrophic” scenario.
- “There’s a level of complacency that something’s going to happen between now and the end of March to actually open it because we know how catastrophic it is, and I think that’s the play that the financial markets are betting on,” Currie said.
It will take more than an occasional tanker or two slipping through the waterway to undo a severe supply crunch.
Rory Johnston, founder of closely followed CommodityContext.com and described by Bloomberg as one of the “least alarmist” oil-market analysts, noted in a social media post on X late Monday that when it comes to flows through the Strait, “we don’t need a pick-up, we need a full resumption of prior normal traffic levels.” A Strait running at 50% traffic would still be an “existential crisis to the global economy,” he said.
Still, Wall Street veterans argued that Trump’s move to calm the market late Monday was an important tell. Trump’s remarks indicated the administration’s “pain point” in terms of a resolution of the conflict is crude around $100 a barrel, said Peter Boockvar, chief investment officer of One Point BFG Wealth Partners, in a Tuesday morning note.
Tom Essaye, founder of Sevens Report Research, said recent price action shows the primary trend in oil remains higher, but sentiment is fragile and conviction is low. That’s likely to leave energy markets “rather volatile” in the sessions, and potentially weeks, ahead, he said, depending on geopolitical developments.
- “Any progress towards a ceasefire will be well received and served to tamp down volatility with oil prices likely to track back towards the $60 to $70 area as long-term fundamentals are reassessed,” he wrote.
USDA snoozer: The March World Agricultural Supply and Demand Estimates tend to be low-key since they’re unaccompanied by crop production reports. Tuesday’s release was in line with expectations, showing no change to U.S. ending stocks for corn, wheat and soybeans.
Still, there were some interesting tidbits, though markets were left largely unmoved by the data. Highlights include a rise in world corn ending stocks and a cut to world use of corn outside of feed (a large chunk of which is ethanol). Pro Farmer finds the cut to world use outside feed puzzling as vegetable oil prices have surged amid anticipation of higher use to make up for tighter crude supplies.
Domestic consumption: The heads of major farm commodity groups testified before the Senate Agriculture Committee on Tuesday, arguing the case for expanded domestic markets for U.S. grown ag products. American Soybean Association President Scott Metzger told the panel that expanding domestic demand is critical for American soybean farmers who are facing declining commodity prices, rising input costs, and continued trade uncertainty, and called for the administration to finalize guidance for the 45Z Clean Fuel Production Credit and Renewable Fuel Standard renewable volume obligations for 2026 and 2027.
National Corn Growers Association President Jed Bower pushed for action on long-stalled legislation that would allow year-round access to 15 ethanol blends, or E15. “Aside from the economic boost it would provide to farmers, year-round E15 would lead to significant savings for American consumers and strengthen U.S. energy dominance at a time when geopolitics are increasingly complicating markets and supply chains,” he said.
Indian edible oil buyers in a rush: A jump in vegetable oil prices and rising freight rates have pushed Indian buyers toward prompt shipments due to worries deliveries of newly purchased soybean oil and sunflower oil could be delayed by the Middle East conflict, Reuters reported.
Since India is the world’s largest importer of vegetable oils, the move to curb fresh purchases could limit further upside in prices of palm oil , soyoil and sunflower oil, the report said, although it may tighten local supplies in April.
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