Washington’s oil lever is depleted; analyst shifts focus to VIX and natural gas
Ukraine's recent drone attack on a major Russian refinery coincided with Houthi missile strikes in Saudi Arabia. Analyst John Divine noted that while the market had somewhat ignored Ukraine, renewed attention could push crude higher, negatively affecting equity markets. On Monday, oil prices fell 5.4% as tensions eased and Trump hinted at diplomacy with Iran. Divine emphasized the VIX index—measuring S&P volatility—as a key indicator for potential market instability. The VIX closed below $15 on Monday, suggesting equities are not yet pricing in geopolitical risks. Diesel prices hit record highs due to supply shocks from Ukraine and Middle East tensions, contributing significantly to inflation. The U.S. Strategic Petroleum Reserve (SPR) has been depleted over multiple administrations, reaching a 40-year low of around 285 million barrels—about 40% capacity. Divine believes the Trump administration will struggle to use this lever effectively for price relief.
Topics: Middle East tensions oil stock market reaction Ukraine war VIX volatility