Gasoil unwinds part of the risk premium while markets still price uncertainty

The shift started with a softer tone from the Trump administration on Iran. Fears of near term military action eased and energy reacted quickly. ICE gasoil slipped back toward 640, removing part of the geopolitical premium built over the past two weeks. Context matters. Gasoil traded as low as 558 on January 6, surged to around 660 by January 14 as rhetoric escalated, and has only partially retraced. Based on that move alone, more than 75 percent of the Iran related risk premium remains embedded in the price. This is not a market pricing resolution. It is a market pricing a pause.

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