Oil: Supply risks and central bank pressures – Rabobank

Rabobank's Senior Macro Strategist, Bas van Geffen, is concerned about escalating Middle East tensions and the impact on oil supplies. Houthi attacks and damage to Saudi infrastructure have forced more oil flows through the Strait of Hormuz, raising supply risks. The damage to the east-west pipeline has increased Iran's leverage, forcing Saudi Arabia to export oil once again through the Strait of Hormuz. The Houthis' potential attack on the Bab el-Mandeb strait and rumors of laying mines further restrict tanker movements.

The situation in the Middle East is on an escalatory path, with Houthi attacks on Saudi Arabia becoming a regular occurrence. This has led to supply risks via Bab el-Mandeb and potential mines in the waterway. The energy market has shifted higher due to the re-escalation, and crude and refined product prices are drawing attention from both motorists and lawmakers. US Senate Majority Leader Thune has expressed openness to exploring a diesel export ban to ease domestic price pressures.

The Federal Reserve's monetary policy decision has also influenced currency markets, with the US Dollar soaring following the 25 basis point rate hike expected. This has led to the AUD/USD pair trading south of 0.7100 early in the Asian session, while USD/JPY hit fresh weekly highs around 156.00. Gold, however, turned negative following the Fed's decision, with the XAU/USD pair sliding towards the $4,250 price zone.

Chairman Kevin Warsh's hawkish comments fueled bets for additional rate hikes before the year ends. Meanwhile, Japan's ultra-low interest rates are expected to tighten policy again, making the Japanese Yen one of the world's cheapest sources of funding.