Trump–Pezeshkian interim accord reopens Hormuz, pushing Brent lower and lifting oil-sensitive Asian currencies
DBS Group Research said an interim memorandum of understanding between US President Donald Trump and Iranian President Masoud Pezeshkian has reopened the Strait of Hormuz to all traffic, with negotiations towards a final agreement continuing. The arrangement follows the stated aim of ending the Middle East conflict, although differences remain over nuclear and other key issues.
Brent has fallen to around USD76, a move that eases energy-driven inflation pressure and reduces the strain associated with higher import bills. That backdrop offers some support for oil-sensitive Asian currencies that had faced headwinds when crude prices were elevated.
Brent Oil Prices Remain Subdued Amid Geopolitical Developments
Given the new US-Iran agreement and the reopening of the Strait of Hormuz, we see the recent drop in Brent crude to $76 as more than a temporary dip. The geopolitical risk premium that kept prices elevated above $85 earlier this quarter has been significantly deflated. We are positioning for oil prices to remain capped in the near term by selling out-of-the-money call options on August Brent futures with a strike price around $80.
This situation has historical parallels, such as the period following the 2015 nuclear deal, which saw Iranian oil exports eventually add over 1 million barrels per day to global supply, keeping prices subdued for an extended time. Current reports from the Energy Information Administration (EIA) already show a slight build in US crude inventories last week, suggesting the market was softening even before this deal. This new potential supply from Iran will likely establish a firm ceiling on prices through the summer driving season.
Implications For Asian Economies And Sector Positioning
The immediate impact on oil-importing Asian economies is a clear positive, and we are adjusting our currency positions accordingly. The Indian Rupee, which touched a record low against the dollar last month amid soaring energy costs, is now showing signs of recovery, strengthening 0.5% in today’s trading. We are buying call options on currencies like the Indian Rupee (INR) and Thai Baht (THB) to capitalize on their improved terms of trade.
Lower fuel costs also provide direct relief to transport and industrial sectors that have faced margin pressure. The International Air Transport Association (IATA) recently noted that jet fuel costs accounted for over 31% of airline operating expenses this year, a five-year high. We are therefore establishing long positions in transportation sector ETFs and select industrial names sensitive to energy input costs.
