The Fog of Peace
The US says the war is over and Hormuz is open. Energy markets are desperate to agree. Here’s what we know, what we don’t, and why the next two months will be more dangerous than headlines suggest.
Energy prices are selling off hard this morning after a tumultuous weekend of headlines that culminated, against the odds, with the US and Iran apparently agreeing to a high-level framework agreement to end hostilities and re-open the Strait of Hormuz.
Dutch TTF, the EU natural gas benchmark, opened at an eight-week low of €44/MWh, down about 5% on Friday’s close. Energy markets, ever desperate to price in the peace story, are taking President Trump’s pronouncements at face value.
Overnight, Trump declared the US–Iran deal “complete” and proclaimed a toll-free reopening of the Strait and the removal of the US naval blockade. Pakistan, which has mediated throughout, said a deal had been reached. Iran’s Deputy Foreign Minister Kazem Gharibabdi reportedly confirmed “a permanent and immediate end to the war on all fronts, including Lebanon”. An official signing is slated for Friday 19 June in Geneva, after this week’s G7 meeting in Evian, Switzerland.
Those are the headlines. The substance is thinner. No text has been published, and the hardest questions – Iran’s nuclear programme, the uranium stockpile, funding of regional proxies, and the wider sanctions regime – are all pushed into a 60-day negotiation that has not yet begun.
"The narrative war is only just beginning." - Watch on YouTube
I outlined the gap between the market’s optimism and the physical reality on Al Jazeera late last night; the clip is above (or watch on YouTube here).
Three main things are not settled:
- Whether Iran has really given up control of the Strait
- How quickly mines can be cleared from Hormuz
- Whether any eventual deal survives contact with reality
The longer version is below (~1,000 words). Bottom line: the narrative war is just getting started. Beware who you choose to believe.
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