Oil prices are marginally higher today as we watch and wait on Iran.

Trump is out once again reminding everyone that an ‘armada’ is heading towards Iran and it’s even bigger than the one that went to Venezuela. That’s obviously a threat and will hang over any negotiation.

This is the kind of thing that can get ugly fast and that’s why oil has rallied steadily from $59 on Jan 22 to $65.73 last. We’re at the point where there are two-way risks because this could also de-escalate or US attacks could avoid hitting oil infrastructure. Iran could also refrain from closing the Strait of Hormuz.

It’s all a bit of a mess but I get the sense that it’s too early to be betting on conflict. Negotiations tend to drag for a little while and a US attack on the weekend would be seen negatively internationally without at least a token effort at negotiations. There’s room to disagree on that because the US looked like it might launch strikes two weeks ago.

Again though, it’s going to matter what the US hits and how hard. Trump hates higher oil prices and for that reason, I just don’t think that oil is that big of a card to be played in this conflict.

WTI crude daily

The old adage is to never chase a geopolitical move in oil and I think that’s where we are. Earlier in the week, I wrote that risks were underpriced but after a $3 move higher, I don’t think that’s the case anymore. The precious metals market is also a reminder that corrections can happen in a hurry (as if energy traders needed that reminder).

Another spot to watch on the weekend is OPEC, which has a meeting scheduled on Feb 1. No big moves are expected but keep an eye on signaling around supplies and pricing. They’ve been a tough group to predict.

Update: