The UN General Assembly meeting in New York this week could shape the medium-term direction of crude oil prices, as US-Iran talks may determine whether tensions escalate or ease, Macquarie's Global FX and Rates Strategist Thierry Wizman said in a note on Tuesday.
He said crude oil prices also matter for the global inflation outlook and monetary policy. Major central banks, including the US Federal Reserve, have cited energy prices or geopolitical risks as factors in their policy decisions, which Wizman said was a key reason behind recent hawkish rhetoric.
Wizman said Macquarie continues to associate higher oil prices with a stronger US dollar against major currencies.
That relationship does not reflect an expectation that higher oil prices would necessarily prompt the Federal Reserve to raise interest rates, he said, noting that central banks broadly would likely take a more hawkish stance if oil prices rose further.
Instead, the US and the dollar benefit from higher crude prices through their impact on the country's terms of trade and real incomes, Wizman said. "We believe that the US-Iran War, by keeping crude oil prices high, has been a key upholder of the USD's strength this year," he said.