EUR/USD, USD/JPY, EUR/NOK flows - oil hesitates as US-Israel domestic politics plays out
Oil nudges lower on reports US reach out on Iran talks
Israel also at critical moment for markets coming out of hung election result
Oil has slipped a little out of the focus of late, in part given the false quiet into the midterms, but it remains the pivotal driver for macro and market outlooks into the end of the year and through into 2027. The dynamics around US-Israel politics remains key and with some notable development is with still unclear implications.
First, WSJ reports that VP Vance, under Trump's direction, sent a letter to Iran's Supreme National Security Council in an effort to restart negotiations. Markets too battle weary to read too heavily into that at this point, but front months off around $1 on the news, and potential to extend if this is seen to further defuse worries over imminent post midterm renewed strikes.
The other imponderable is the Israel election heading into a hung result, Netanyahu holding on as caretaker with a slightly better result than pre-election polling, while coalition jockeying plays out, with difficult arithmetic on all sides. How these talks develop and the exact make up of the government and crucially its foreign policy stance remains far from clear and could also be critical in the shape of the next geopolitical chapter (and along with its fixed income and FX direction).