Rising oil is still the big market risk despite today’s pullback, analysts say
Markets kept their cool on Monday amid a fast-moving and volatile geopolitical landscape in the Middle East — but the longer-term risk premium has likely risen, while oil prices remain on edge, analysts said.
Iran launched more than 300 drones and missiles against military targets in Israel on Saturday, marking the first direct attack on the Jewish state from Iranian territory. The offensive caused limited damage and no fatalities.
Iran said it was acting in self-defense in response to a strike on its diplomatic compound in Damascus, Syria, earlier this month. Israel has declined to comment on its involvement.
Also on Saturday, ahead of the strike, Iran seized a container ship in the Strait of Hormuz that Tehran said was linked to Israel. The sea passage is described as the “world’s most important oil chokepoint,” with flows totaling around 21% of global petroleum liquids consumption in 2022, according to the U.S. Energy Information Administration.
By Monday, global players including the U.S. and European leaders were seeking to cool tensions, urging Israel to show restraint in its response.
Foreign exchange markets are pricing in “near term de-escalation” in the wake of the weekend events, Adarsh Sinha, co-head of Asia FX and rates strategy at Bank of America, told CNBC’s “Squawk Box Europe” on Monday. The ‘safe haven’ U.S. dollar was 0.15% lower against a basket of major currencies early Monday, also weakening against the Iranian rial and the Israeli shekel.
Sinha nevertheless added that “the fact that we moved from a proxy confrontation to a direct confrontation, even though that de-escalates in the near term, the longer term risk premium probably goes up.”
“I think the FX market ultimately will take its cue from oil prices because ultimately, that’s the channel through which it spills over to the FX market,” he said.
Oil prices were lower in early Asia hours on Monday, cooling off from Friday gains which built on the expectation of an Iranian strike. Nymex WTI crude futures contracts with May expiry were 0.81% lower at $84.97 per barrel by early afternoon in London, while the ICE Brent contract with June delivery was down 0.73% at $89.79 per barrel.
Markets had priced in the “well-telegraphed” event, which explains the price decline, Amrita Sen, founder of Energy Aspects, told CNBC’s “Street Signs Europe.”
That doesn’t mean prices will continue to go down, she added — although their course will hinge on Israel’s reaction and next steps.
Risks increased
Economists and analysts agreed that overall long-term risks and uncertainty are now heightened.
“The unprecedented Iranian attack on Israeli targets casts a shadow over the economic and financial outlook beyond the region itself. The risk that the conflict in the Middle East may escalate further has increased,” Holger Schmieding, chief economist at Berenberg Bank, said in a Monday note.
Conflict between Israel and Iran is unlikely to have a severe impact on the global economy, Schmieding continued, pointing to the relatively limited effect to the economic outlook caused by Houthi attacks on cargo ships in the Red Sea.
Disruption to oil shipments through the Strait of Hormuz “would be a very different matter,” he said, calling this the “key risk to watch.” However, this hit to oil exports would hurt Iran badly, Schmieding continued, meaning that Tehran is unlikely to want to escalate to such a level.
A possible Iranian blockade of the Strait of Hormuz will hold Brent prices above $84 dollars per barrel for the remainder of the year and cause a potential rally to over $100 per barrel in the event of “open war,” according to Bartosz Sawicki, market analyst at Conotoxia.
Iran’s assault has already threatened regional oil supply in a market that has been “broadly balanced” in the first part of the year, and increased the risk of flipping to undersupply, Sawicki said. Iran’s crude production totals nearly 3.5 million barrels per day, accounting for around 3.3% of global production, he noted.
“A tougher stance on Iran and stricter enforcement of previous sanctions should be expected,” Sawicki, said. Significant retaliation by Israel could meanwhile trigger an oil price rally, strong demand for the U.S. dollar and renewed buying of gold, he added.
European equity markets were slightly higher Monday, with U.S. futures also brightening from a Friday retreat.
Impact on stocks could come by way of a change to interest rate expectations, analysts at Deutsche Bank said in a note.
Yet what form that will take is uncertain, they add. Higher oil prices could keep inflation sticky in major economies, pushing back the timing of interest rate cuts — while a “geopolitical shock” could bring such trims forward by threatening growth.
Tesla has released a new video that includes some footage of a previously unseen vehicle interior. Could it be an early concept of the interior of the Robotaxi?
For the last few years, Tesla has been working on a vehicle designed from the ground up to be a self-driving vehicles. The company has been referring to it as ‘Robotaxi’.
CEO Elon Musk insists that Tesla is still dedicated to delivering its promised self-driving capability to existing vehicles delivered since 2016 through software update, but it also decided to build a new vehicle designed entirely around the fact that it will be driverless.
Not much is known about the vehicle other than hints that it won’t have a steering wheel or pedals, and that it will be “Cybertruck-like” in terms of design.
Now, Tesla has released a new video, which Musk wanted to make clear he wasn’t involved in, to try to encourage shareholders to vote for his $55 billion compensation package and moving the company’s state of incorporation to Texas:
In the video, many pointed out a shot of the interior of a vehicle that doesn’t match anything Tesla has released to date:
The image shows what appears to be a two-seater vehicle without steering wheel and a center display similar to what is found in current Tesla vehicles.
The seats are unlike what you would find in modern vehicles and something closer to what you would find in public transit, like a train:
Tesla plans to unveil its ‘Robotaxi’ on August 8th. The automaker has recently accelerated its timeline for the vehicle and plans to bring it to market as soon as next year.
Do you think this is an early concept for the Tesla Robotaxi interior? Let us know in the comment section below.
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Mercedes-Benz High-Power Charging just opened more DC fast chargers at Buc-ee’s stores in the Dallas-Forth Worth area.
Three new Mercedes DC fast charging stations are at Buc-ee’s in Fort Worth, Temple, and Royse City. Mercedes asserts that every one of its chargers offers up to 400 kW of power.
It’s also adding 12 more charging stations at Buc-ee’s in the Dallas-Fort Worth, San Antonio, and Houston metro areas – also known as the Texas Triangle, home to 68% of Texans:
Buc-ee’s isn’t your typical convenience store – they’re huge, with some stores covering over 50,000 square feet, and they offer a wide variety of items, including snacks, beverages, fresh food, clothing, home decor, and Texas-themed merchandise. It’s known for its homemade fudge, jerky, and beaver nuggets (caramel-coated corn puffs). Most Buc-ee’s locations are open 24 hours a day, seven days a week.
In November 2023, Mercedes announced it had made an agreement with Buc-ee’s to build EV charging hubs at most of its existing stores. Mercedes is aiming to have around 30 online by the end of the year. There are currently 48 Buc-ee’s locations across the US South, 34 of which are in Texas.
When I spoke to Mercedes-Benz High Power Charging CEO Andrew Cornelia last year, he was passionate about the importance of placing EV chargers near amenities that travelers need.
Mercedes offers open access for all EV drivers, including roaming with other charging networks. Its charging hubs support contactless payments with credit cards or smartphone wallets.
The first Mercedes DC fast charging station came online last November at its headquarters in Sandy Springs, Georgia. Mercedes-Benz plans to deploy 2,500 high-powered chargers in 400 hubs by 2027.
Texas is the US’s No. 1 producer of clean energy and ranks fourth in public EV charging. However, to meet driver demand, the state needs around 95,000 more public chargers by 2027.
Read more: America, Mercedes-Benz wants you to indulge in retail therapy while you’re DC fast charging
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Environment
Polestar (PSNY) stock faces potential Nasdaq de-listing after failing to file its annual report
Another EV stock may be removed from the Nasdaq exchange. After failing to file its annual report, Polestar (PSNY) received a notice from the Nasdaq as the company faces a possible de-listing.
Polestar, Volvo’s former high-performance unit, was established as an EV brand in 2017 under Geely’s control.
Since launching the Polestar 2, its first all-electric vehicle, the brand has expanded into 27 markets globally. The electric car has even become a top seller in several key markets like Norway, Sweden, and Germany.
However, like many EV startups, Polestar has hit its fair share of hurdles. After cutting guidance late last year (from 80K to 60K), Polestar still missed its target, delivering 54,600 vehicles last year.
In February, Volvo announced plans to sell 62.7% of its stake in Polestar as it looks toward its next growth stage. Volvo also confirmed it will “not provide further funding to Polestar” outside of its existing $1 billion outstanding convertible loan.
The news came after Polestar announced plans to cut 15% of its global workforce amid slowing EV sales earlier this year.
Polestar stock facing potential Nasdaq de-listing
After failing to file its annual report for the fiscal year ending December 31, 2023, Polestar received a deficiency notice from the Nasdaq.
The notice states Polestar is not in compliance with its listing rules, which require the timely filing of periodic financial reports.
Polestar said the notice has no immediate impact on the company’s listing. However, under the Nasdaq listing rules, Polestar has 60 days to submit an action plan. If Nasdaq accepts it, Polestar could be issued an additional 180 days from the notice date, or until November 2024, to regain compliance.
The company has already received consent from lenders under its nearly $1 billion 3-year loan facility for the late filing. Polestar says it is fully committed to regaining compliance.
Polestar is working to file the annual report “as soon as practicable” and to report Q1 2024 earnings shortly after.
Polestar stock was down over 13% on Monday following the potential de-listing notice. PSNY shares are now down over 50% this year, hitting their lowest prices since going public.
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