LIVE MARKETS-Why China matters in Iran crisis
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WHY CHINA MATTERS IN IRAN CRISIS
While markets breathed a sigh of relief after U.S. President Donald Trump said he would postpone any military strikes against Iranian power plants for five days, market participants are trying to figure out when the Middle East conflict could end.
UniCredit crunched some numbers and found out that oil prices at around $105 suggest a disruption lasting around 3-1/2 months. Oil prices dropped to $105 after hitting $114 earlier in the session.
Odds on prediction‑market platform Polymarket imply a 61% chance the war ends by June 30, from 56% before today's Trump remarks.
Edoardo Campanella, director at UniCredit Investment Institute, provided an explanation on market assumptions in his letter to clients at the weekend.
The role of Russia and China is crucial as they provide military and intelligence support.
Russia might be fine dragging things out indefinitely, but China, which is a large oil importer highly dependent on oil and gas flowing through the Strait of Hormuz, will want to avoid an energy shortage.
“In short, absent a sudden political shock, limitations regarding China’s strategic reserves make a June de‑escalation scenario the most probable,” he says, after stating that “a realistic tolerance window (for China) is closer to three months.”
China “prefers a conflict that remains limited in scope but still puts a strain on the U.S. military, without jeopardizing its own energy security,” he adds.
However, "if Beijing fails to persuade Tehran to stand down, the geopolitical situation could deteriorate sharply, especially if China begins to feel the pressure to secure access to critical energy supplies."
(Stefano Rebaudo)
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