The latest development is that Iran has rejected a ceasefire proposal from Iraq, believed to be passed on from US president Trump. The main excuse that Iran is going with this time is that the proposal fails to address the question of control over the Strait of Hormuz. Dum, dum, dum.

Iran said that they were not going to accept a “temporary deal”. And so, that leaves both sides with little to nothing to work with ahead of the weekend.

Now, we’ve seen this sort of dance before between the US and Iran. It was the same kind of back and forth we had back in May before both sides agreed to a ceasefire deal in June. So, it’s not to say that these words are binding and that both sides will be uncompromising on their positions.

But as mentioned before, Iran’s main tactic in all of this is to continue to play for more time. And all these little actions and delays build up towards the bigger narrative of stalling the US and hoping to extract more concessions without really doing anything on the nuclear front.

The main issue with the current status quo for markets though? It is that the Strait of Hormuz remains closed and the disruption continues for the global energy market.

Since 20 July, ship traffic along the strait has dropped to single digits. Kpler is noting that there is roughly just ~3 vessel transits per day this week. And in terms of LNG tankers crossing, that remains a big fat zero ever since 16 July.

In a blink and you might miss it run, Dutch TTF natural gas futures are now surging back up to the highest since March and is up over 40% since the end of June. Even looking to oil prices, WTI crude is up over 30% this month in revisiting six-week highs above $90.

What makes matters worse is not just the fact that traffic along the Strait of Hormuz has reached a standstill, it is that this similar disruption may yet affect the Red Sea. We’re already starting to see some potential in that with the Houthis targeting vessels that are either Saudi-linked and/or bound for the Saudi port of Jeddah.

If the situation there intensifies, all it means is that we haven’t seen the worse of what is to come yet. The oil market had spent its savings (depleting inventories) in hope for a resolution by the summer, and now there’s not all too much to fall back on after that. Trouble.

This article was written by Justin Low at investinglive.com.