Latest / The Commodities Economy with Fexingo: Oil, Gold, Wheat, and Raw Material Markets / Why Brent Crude Holds Above $90 Despite Iran Strikes
Transcript
- Lucas: It's June 11, 2026. US strikes against Iran are making headlines this morning. Stock futures are up — but oil is basically flat. Brent crude is at about $93 a barrel, down slightly over the last five days. That is not the reaction you'd expect from a major Middle East escalation. Luna: Yeah, I was watching the screens this morning and thought the same thing. Gold is down over 5% in the last week too. So much for the safe-haven narrative. Lucas: Exactly. And that's the puzzle we want to dig into today. If walking through the economy with us has made something click — a trade, a chart, a concept — you might want to know we do this show completely ad-free. No sponsors, no ad reads, ever. That's a choice we've stuck with from day one. If you appreciate that and want to support it, the link is buy me a coffee dot com slash fexingo. No pressure, just an option. Luna: Totally agree. We keep it independent on purpose. Okay, back to oil — why isn't crude surging? Historically, a us iran conflict would send prices up 10, 15 percent overnight. Lucas: Right. In 2019, when drones hit Saudi Aramco's Abqaiq facility, crude spiked 15 percent in a single day. That was a supply disruption. This time, the strikes are against military targets, not oil infrastructure. Iran's oil production has already been under sanctions — it's around 3 million barrels a day, but very little of that reaches global markets legally. Luna: So the market is basically saying this doesn't change the physical supply picture. Lucas: Correct. But there's another layer. The Strait of Hormuz — about 20 percent of global oil transits through it. If Iran were to try to choke that, prices would spike. But so far, no sign of that. The US Navy is present, tanker traffic is normal. The market is pricing that as a low-probability event. Luna: And spare capacity. I keep hearing about spare capacity as the buffer. How much is there really? Lucas: The International Energy Agency estimates about 5 to 6 million barrels per day of spare capacity, mostly in Saudi Arabia and the UAE. That's enough to cover a complete loss of Iranian exports for months. So even if something did happen, OPEC+ could ramp up. That's a big reason the war premium is capped. Luna: Meanwhile, gold is falling. That's interesting. If the war isn't driving safe-haven buying, what is? Lucas: Gold at $4,117 is down 5 percent in five days. That's a sharp move. I think what's happening is a rotation out of gold and into risk assets. Stock futures are up this morning — investors are treating this as a contained conflict, not a world war. The 10-year breakeven inflation rate ticked up to 2.34 percent, so maybe some inflation hedging, but gold is not acting like fear money. Luna: So what about energy stocks? Exxon is at $150, Chevron at $190. They've been pretty steady. Lucas: Yeah, the XLE energy ETF has been flat over the past week. That tells you that equity investors are not pricing in a sustained oil rally either. If they thought crude was going to $110, those stocks would be up. Instead, they're holding steady. The market is saying 'this too shall pass'. Luna: There's also the Kuwait airspace closure headline from this morning. That's a small logistical issue, but Kuwait is a major producer. Any impact? Lucas: Minimal. Kuwait produces about 2.5 million barrels a day. But the closure is temporary — they reopened airspace within hours. It caused a brief blip in futures, but nothing sustained. The market is very good at distinguishing between theatrical disruption and real supply loss. Luna: The other commodity that caught my eye was natural gas. Up 0.6 percent in five days, at $3.17. That's also pretty calm. Lucas: Natural gas is a different beast. It's mostly a regional market. US production is at record highs — over 100 billion cubic feet per day. Even if the Middle East gets messy, LNG exports could be affected, but the US domestic gas market is oversupplied. So no fireworks there. Luna: Copper is down 1.7 percent over five days. That's interesting because it's often called the 'Dr. Copper' — it has a PhD in economics. Is it signaling a global slowdown? Lucas: Copper at $6.22 is off its highs. I think the bigger driver there is China demand. China's manufacturing PMIs have been soft, and even though green energy demand is growing, it's not enough to offset the property slowdown. The Iran situation adds uncertainty, but copper is more worried about interest rates and global growth. Luna: And cotton is down 3.1 percent. That's a bigger move. What's going on there? Lucas: Cotton at 75 cents has been under pressure from demand concerns. Global textile demand is weak, and inventories are actually higher than expected. Plus, the US dollar has been firm — a strong dollar hurts commodities priced in dollars. Cotton is particularly sensitive to that. Luna: Let's talk about the dollar briefly. The DXY hasn't moved much this week. But if the war escalates and the Fed stays hawkish, the dollar could rally. That would be a headwind for all commodities. Lucas: Absolutely. The Fed is in a tough spot. CPI came in at 334.0 for May — that's up from 332.41. Core CPI at 336.1. Inflation is persistent. The PCE price index is at 130.9, up from 130.38. So the Fed can't cut rates easily. If the war pushes energy prices higher, that adds to inflation, and the Fed has to stay tight. That strengthens the dollar, depresses commodity prices. It's a feedback loop. Luna: So the market is basically betting that the conflict stays limited, spare capacity is adequate, and the Fed doesn't have to panic. Is that a reasonable bet? Lucas: For now, yes. But the risk is tail events. What if Iran retaliates by mining the Strait of Hormuz? What if there's a cyber attack on Saudi pipelines? The market is pricing a 5 percent chance of that, but if it happens, oil doubles overnight. The asymmetry is worth noting. Luna: And that's why some investors are buying energy stocks as 'turmoil insurance'. I saw a headline about that yesterday. Companies like Exxon and Chevron pay decent dividends and have strong balance sheets. Lucas: Right. They offer a kind of hedge. If oil stays flat, you collect the dividend. If oil spikes, the stocks go up. It's a cheap option compared to buying oil futures. But you have to be okay with the downside if oil falls. Luna: What about the broader macro picture? The breakeven inflation rate at 2.34 percent suggests the market expects inflation to stay above target. That's supportive for commodities in the long run, but the short-term is all about geopolitics. Lucas: Exactly. The breakeven is the market's expectation for average inflation over the next ten years. It's been creeping up. That implies that even if the Fed cuts rates eventually, inflation won't go away. Hard assets like gold, copper, oil should benefit. But today, the market is saying 'not yet'. Luna: So the takeaway for listeners: don't assume a Middle East conflict automatically means higher oil prices. The structure of supply, spare capacity, and demand all matter. Lucas: Exactly. We're not saying the risk is zero. But the market is sending a signal that it's priced in a relatively benign outcome. That could change with one headline. But as of June 11, 2026, Brent at $93 is a statement: this conflict, so far, is not a supply crisis.