A senior executive from Baker Hughes (BKR.US), one of the world's top three oilfield services companies, indicated last Friday that the company's financial projections assume the U.S.-Iran conflict will persist at least until the end of June. The Strait of Hormuz may not see a full resumption of navigation until later this year. The Chief Financial Officer, Ahmed Moghal, stated during the company's first-quarter earnings call that significant uncertainty remains regarding the duration and escalation of the conflict. The assumption that the Strait of Hormuz might remain closed for several months is widely shared across the energy industry. A survey conducted this week by the Federal Reserve Bank of Dallas, which polled nearly 100 oil and gas executives, revealed that close to 80% of respondents believe the strait will not reopen before August or even later. Baker Hughes CEO Lorenzo Simonelli, speaking on the same call, remarked that geopolitical risk has become a structural reality for oil and gas markets, potentially leading to a persistent risk premium in oil and liquefied natural gas prices. As the conflict enters its eighth week, oil tanker traffic through the Strait of Hormuz remains extremely low, with both the U.S. and Iran detaining commercial vessels in an attempt to enforce mutual blockades in and around the strategic waterway. Crude futures rose significantly this week due to the strait's continued closure, although prices showed mixed movement on Friday. This volatility was driven by news of U.S. and Iranian officials traveling to Pakistan for further talks, following a postponement of discussions originally scheduled for earlier in the week. Reports indicate that U.S. negotiators Steve Witkoff and Jared Kushner will travel to Islamabad in an effort to restart dialogue with Iran, while Iranian Foreign Minister Ali Bagheri Kani is expected to submit a new written response to a U.S. peace proposal during his visit to Pakistan. Thierry Wizman, Macquarie's Global FX and Rates Strategist, noted in commentary that recent developments suggest traders are increasingly accepting that the military phase of the U.S.-Iran conflict is concluding or has concluded, while an economic war is becoming entrenched. Ole Hansen, an analyst at Saxo Bank, added in a report that even if the strait fully reopens, a return to normal shipping volumes could take months. This delay would exacerbate supply tightness, particularly for diesel and jet fuel, and could force nations and companies to curb demand. Regarding specific prices, as of the latest update, crude oil for June delivery on the New York Mercantile Exchange rose 1.12% to $95.46 per barrel. Brent crude for the same month increased 1.33% to $100.45 per barrel. Natural gas for May delivery edged up 0.41% to $2.694 per million British thermal units. For the full week, New York crude and Brent crude posted gains of 14.3% and 16.5% respectively, while New York natural gas declined by 5.6%. Energy stocks, represented by the Energy Select Sector SPDR ETF (XLE.US), advanced 3.3% last week.
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