Oil: Is Brent Below $95 Sending a False Signal to the Global Economy?

A Brent Crude Under $95 Masks Structural Market Disarray

At first glance, Brent crude trading below $95 might give the impression of a relatively controlled oil market. The dominant consensus is betting on a de-escalation in the Middle East, which is leading to a gradual reduction in the geopolitical risk premium factored into crude prices. Expectations of eased tensions around the Strait of Hormuz are contributing to this downward pressure.

However, this view based solely on the price per barrel might be misleading. Reuters reports an unusual discrepancy between prices on the physical oil market—where actual cargoes are exchanged—and prices on the futures markets, where financial contracts are traded. Essentially, physical prices are no longer following the trajectory suggested by futures, which is disrupting the global oil price signal.

This anomaly is not trivial. The oil price signal serves as a reference for the entire energy chain: it guides refiners' purchasing decisions, airlines' hedging strategies, industrial cost calculations, and ultimately, inflation projections by central banks. When this signal becomes unreadable, it complicates all of these decisions.

Hormuz, Diplomacy, and Blockade: Three Conflicting Forces Obscuring Expectations

The Strait of Hormuz remains the main transmitter of geopolitical tensions to oil prices. According to Reuters, about 20% of the world's oil traffic was affected during the blockade of this strategic passage linked to the conflict involving Iran. Any further disruption would have immediate repercussions on the global crude supply, which maintains a baseline of nervousness in the markets.

Simultaneously, indirect negotiations between Washington and Tehran are underway regarding an extension of the ceasefire, with Islamabad mentioned as a contact point. This diplomatic prospect is currently the most bearish factor for Brent in the short term: if these discussions succeed, the risk premium could compress further. Direct talks between Israel and Lebanon also point towards regional easing, though they remain fragile and are focused on the Israeli side regarding the dismantling of Hezbollah.

Conversely, Washington is massively increasing its military presence in the Middle East with thousands of additional troops and is maintaining a maritime blockade against Iran that has already forced ships to turn back. This geopolitical context weighs on the investment climate well beyond the oil sector alone. As long as this military standoff persists, the market remains vulnerable to a sudden upward shock, fueling the unprecedented coexistence of diametrically opposed scenarios on the same underlying asset.

The Real Macroeconomic Risk: Global Inflation Hinged on a False Signal

For investors and economic decision-makers, the danger lies less in Brent crude prices at $95 or $110 than in the inability to reliably anticipate the trajectory of energy prices. When the physical market and futures markets diverge, the inflation forecasting models used by central banks lose relevance. Refiners, who adjust their margins and inventories based on these discrepancies, are forced to operate with reduced visibility, which can impact pump prices and industrial costs.

If de-escalation is confirmed—resulting from successful U.S.-Iran negotiations or progress in Israel-Lebanon talks—the central scenario would be contained Brent prices, providing relief for global inflation. Conversely, if discussions fail or the maritime blockade intensifies, the market could quickly shift towards an energy shock.

In the meantime, uncertainty itself becomes the dominant risk factor. The distortion of the oil price signal means that economic agents—companies, states, investors—no longer have a reliable benchmark for calibrating their decisions. This situation, as long as it persists, mechanically increases the implied volatility across the entire energy chain and, consequently, global inflation expectations.