Manulife Investment Management believes that for the crude oil market, the decisive variable is not ceasefire announcements but the actual shipping conditions in the Strait of Hormuz. Following the outbreak of conflict in the Middle East, international oil prices and commodity prices have experienced significant volatility, persistently unsettling global stock markets, foreign exchange markets, bond markets, as well as international trade and manufacturing sectors. U.S. derivatives regulators are currently investigating an unusual crude oil futures trade that occurred shortly before the former U.S. President announced a two-week ceasefire. Meanwhile, in the latest earnings reports released this week, Bank of America reported a strong 60% growth in its commodities business, while Goldman Sachs unexpectedly missed expectations due to severe losses in its large-scale interest rate trading operations, which fall under its fixed income, currencies, and commodities (FICC) division. Market consensus suggests that even if a ceasefire is implemented, the actual transit situation in the Strait of Hormuz will continue to exert upward pressure on oil prices.

An unusual futures trade is under investigation. According to reports citing informed sources, the probe is being led by the U.S. Commodity Futures Trading Commission (CFTC), which is reviewing trading activities at CME Group and Intercontinental Exchange (ICE). Both exchanges have been asked to submit relevant records. Sources indicated that regulators are seeking information including the so-called "Tag 50" identifier, which can help determine the parties behind the trades. On March 23, trading volumes for S&P 500 e-mini futures and WTI crude May futures suddenly surged during otherwise quiet pre-market trading. Approximately 15 minutes later, the former U.S. President stated on social media that the U.S. and Iran had held talks and would suspend planned attacks on Iranian power plants and energy infrastructure. The news triggered an immediate sharp market reaction, with S&P 500 futures rising over 2.5% before the market open, while WTI crude futures plummeted nearly 6%. The simultaneous, abrupt spike in equity index and crude futures volumes had previously drawn traders' attention, especially as no clear news or trigger was apparent at the time. CME did not specifically comment on the suspicious unusual trades but stated that any investigation should include emerging platforms. A CME spokesperson said, "Nothing is more important than market integrity. We closely monitor markets and work collaboratively with the CFTC to oversee trading activity. It is important that any review of market activity covers all trading venues, including prediction markets like Polymarket and Kalshi, which list related products but have very low disclosure requirements." Last week, U.S. Democratic Senators Elizabeth Warren of Massachusetts and Sheldon Whitehouse of Rhode Island urged the CFTC to investigate such unusual trades and questioned whether certain investors repeatedly abused material non-public government information for trading purposes.

Major banks' earnings reports show mixed results. Beyond suspicions of investors profiting from non-public information, Wall Street banks also reported divergent fortunes. Bank of America's first-quarter earnings released on Wednesday showed a 60% surge in commodities trading revenue. Overall, the bank's quarterly revenue rose 7% year-over-year to $30.3 billion, while earnings per share increased 25% to $1.10, both exceeding market expectations. The bank's global markets co-heads, Denis Manelski and Soofian Zuberi, attributed the revenue growth largely to volatility in oil and precious metals, particularly gold. Activity in these two commodities was unusually high in the first quarter, largely driven by headline news. Precious metals experienced significant swings during the period. Gold prices surged to a record high above $5,400 per ounce before sharply declining in late January. After partially recovering losses, prices fell again following the outbreak of Middle East conflict. Manelski noted that the ongoing Middle East conflict has "significantly altered the investment landscape," and its duration will profoundly impact future investor positioning and views on the global economy. In stark contrast, Goldman Sachs reported weaker-than-expected quarterly results, weighing on its stock price. The underperformance was primarily due to its sizable interest rate trading business. After the Middle East conflict erupted, Goldman's U.S. non-linear gamma rates trading desk underperformed market expectations by nearly $1 billion in the first quarter. This desk is part of Goldman's FICC division, which reported revenue of $4 billion for the quarter, down 10% year-over-year. In early March, following signs of cooling in the U.S. labor market, Wall Street widely anticipated the Federal Reserve would soon begin cutting interest rates. However, the Middle East conflict drove up energy and commodity prices, reigniting inflation concerns and leading markets to scale back Fed rate cut expectations. Sources indicated that Goldman's rates trading desk, which serves several top hedge funds and venture capital firms on Wall Street, is relatively large and thus more sensitive to geopolitical shocks compared to some peers. Nevertheless, Goldman President John Waldron stated on Wednesday, "Especially during periods of high volatility in interest rates and commodity markets, trading operations can occasionally underperform. But I have no long-term concerns about our FICC business."

What is the outlook for oil prices? Markets continue to assess the impact of conflict and ceasefire prospects on commodity outlooks. UBS Global Wealth Management's Chief Investment Office (CIO) wrote in an institutional viewpoint shared on Wednesday that crude oil supplies have tightened in recent weeks, with futures prices swinging sharply due to geopolitical developments: escalating conflict pushes prices higher, while de-escalation and hopes for the Strait of Hormuz reopening cause declines. The core variable affecting oil markets remains the duration and scale of supply disruptions, particularly how long Hormuz shipping remains constrained and how much crude can be rerouted via pipelines. "Currently, the conflict has entered its seventh week, with global crude production outages hitting a record high of 13 million barrels per day. Iran exports about 2 million barrels per day via the Strait, while other Gulf nations are largely unable to use the route. Saudi Arabia and the UAE are exporting via pipelines, but these also face security risks. Recent attacks on storage facilities at Fujairah port have heightened supply uncertainty, with energy infrastructure facing renewed attack risks. Before the conflict, Gulf nations exported approximately 19 million barrels per day of crude and condensate, but average flows over the past 30 days have fallen to around 8 million barrels per day. OECD countries have begun releasing reserves, but progress is slow overall, with Asian nations being the primary users of reserves," UBS stated. "As long as Strait transit remains significantly disrupted, upward pressure on oil prices will persist. With supply disruption impacts becoming more evident, we have again raised our Brent crude price target, increasing the end-June forecast to $100 per barrel (from $90). We also raised our end-September and end-December Brent forecasts to $95 (from $85) and $90 (from $85), respectively. The discount for WTI crude versus Brent is expected to remain around $4 per barrel." If disruptions persist long-term, UBS suggested that a short-term overshoot in oil prices cannot be ruled out, such as Brent breaching $150 per barrel, which would severely impact demand. Concurrently, current hoarding and stockpiling activities could further amplify price volatility. Manulife Investment Management also noted in its Wednesday institutional commentary that the actual implementation and execution of the two-week ceasefire agreement remain highly uncertain. For oil markets, the decisive factor is not ceasefire statements but the real-world shipping situation in the Strait of Hormuz. Thus far, transit volumes through the Strait remain well below normal levels, with only limited vessel movement under restricted technical conditions and Iranian coordination, far from a full reopening. Therefore, blocked transit through the Strait of Hormuz continues to disrupt global crude supply dynamics. Manulife highlighted that physical market indicators still reflect current tightness: Brent crude DFL and CFD spreads remain elevated, with prompt Brent trading at a $35 per barrel premium to near-month futures, and all forward curves showing extreme backwardation. Unless tanker traffic through the Strait consistently recovers to 15 vessels per day, upside risks to oil prices will be hard to alleviate. In Manulife's view, a realistic base case scenario involves the Strait of Hormuz remaining largely closed until end-April, followed by a gradual recovery in transit, with full normalization by end-2026. Under this scenario, average crude prices would be around $110 per barrel in Q2 2026, above current levels, gradually returning to balanced fundamentals by 2027. Supply disruptions would also push up prices of other commodities like natural gas, petrochemicals, and fertilizers. A more optimistic scenario assumes an immediate ceasefire takes effect, shipping gradually resumes, and supply chain disruptions and crude shortages have minimal impact on growth and inflation. In that case, stocks and bonds would rebound quickly, while commodity prices would steadily and orderly return to normal levels. A pessimistic scenario, with probability similar to the optimistic one, assumes shipping does not resume until end-August, followed by a slow restart, which could see Brent prices peak at $163 per barrel in Q3.