OCBC: Brent's Hormuz Risk Premium Remains Fragile After Sharp Drop

OCBC FX strategists Sim Moh Siong and Christopher Wong note that Brent crude oil has dropped sharply on optimism over the reopening of the Strait of Hormuz following a potential US–Iran deal. However, they caution that markets may be underpricing the remaining security risks.

The strategists describe the current risk premium as fragile, suggesting that the swift price move lower could be reversed if geopolitical tensions resurface. The Strait of Hormuz is a critical chokepoint for global oil shipments, and any lingering instability could quickly restore the risk premium.

Traders should monitor further diplomatic developments and any security incidents in the region that could disrupt supply expectations.