Key Takeaways:
The Swiss franc weakened against the euro and pound this week as US-Iran negotiations dragged on without a deal, keeping Brent crude above $95 a barrel and pushing EUR/CHF and GBP/CHF into breakout territory.
"The market is currently focused on whether there's any concrete progress or setbacks in US-Iran negotiations, the tone and substance of statements from both sides, and actual physical tanker movements through the waterway," said Tim Waterer, chief market analyst at KCM Trade.
Brent crude edged up 6 cents to $95.04 a barrel on Tuesday, holding most of the previous session's 5% gain, while WTI slipped 17 cents to $91.99. The stalemate follows conflicting signals from Washington and Tehran: President Donald Trump said Monday that talks were continuing, while Iran's Tasnim news agency reported Tehran had suspended indirect negotiations. Trump later posted on social media that conversations had been "going on continuously, including four days ago, three days ago, two days ago, one day ago, and today."
The Strait of Hormuz, which handled about a fifth of global oil and liquefied natural gas traffic before the war, remains largely closed to commercial shipping. Iran has effectively halted nearly all non-Iranian vessels from entering or leaving the Gulf, choking off supply and driving energy costs up by 50% or more since the conflict began in late February. US crude exports climbed to a record 5.6 million barrels per day in May as Asian and European refiners scrambled for alternative supply.
The latest flare-up on Wednesday underscored the fragility of the ceasefire. Iran's Islamic Revolutionary Guards Corps fired missiles and drones at Kuwait International Airport, killing one person and injuring 63, and targeted the US Fifth Fleet headquarters in Bahrain, according to Iranian state media. US Central Command said all attacks on American forces failed and that it carried out retaliatory strikes on Qeshm Island near the Strait of Hormuz.
"The status of the US-Iran negotiations at any given point will ultimately determine whether the current risk premium stays embedded in oil prices or starts to unwind," Waterer added.
Currency Markets Reprice the Risk Premium
The Swiss franc, traditionally a safe-haven currency, has underperformed this week as markets reassess the probability of a near-term deal. EUR/CHF and GBP/CHF both broke out to the upside, reflecting growing conviction that elevated oil prices and geopolitical uncertainty will persist. The franc's decline during a period of heightened Middle East tension suggests traders are pricing in a prolonged stalemate rather than a sudden escalation.
Iran is seeking access to billions of dollars in oil revenues, waivers on crude exports, and a lifting of the US blockade on its ports, while the US is demanding Iran agree to give up its nuclear activity as a precondition for sanctions relief. Secretary of State Marco Rubio told lawmakers Tuesday that "the war is over," drawing a sharp rebuttal from Democratic Senator Cory Booker.
What's at Stake for Global Supply Chains
Shipping executives meeting in Athens on Monday said any peace deal would need to offer clear rules allowing vessels to resume normal business through the Strait of Hormuz. More than 2,000 cargo ships and oil tankers remain stranded in the Persian Gulf and nearby waters, causing significant damage to global supply chains.
The conflict has also disrupted fertilizer trade — more than 30% of global fertilizer shipments depend on the route — and helium gas used in semiconductor and medical industries. UN children's agency UNICEF said surging transport costs and supply chain disruptions were hindering life-saving aid across eight countries including Gaza, Lebanon, and Somalia.
Trump said Monday he expects a deal to extend the ceasefire and reopen the Strait of Hormuz "over the next week." But with both sides still trading fire and the IRGC vowing that "disrupting the security of the Strait of Hormuz will carry a heavy price for the US military," the path to a resolution remains uncertain.
This article is for informational purposes only and does not constitute investment advice.
