Who will collect the peace dividends?

The price of Brent crude oil has settled around $72 per barrel, a stark contrast to the $126 it reached during the peak of the Iran conflict. This drop might suggest markets have declared victory over the energy shock, but the reality in the Strait of Hormuz remains considerably more intricate, with shipping traffic only beginning its recovery.

The agreement between the US and Iran was a long-awaited signal for markets, yet the situation remains precarious. Further negotiations are frequently interrupted by strikes from Israel, the US, or Iran, and commercial vessels have also suffered damage. Despite these challenges, the number of ships transiting the Strait of Hormuz is steadily increasing, with about 200 passing in the last week, a quarter of the normal flow, but significantly up from near zero during the conflict's height. A full recovery of shipping traffic could take six months or more if the ceasefires hold.

In the liquefied natural gas market, Qatar's plans to resume exports relatively quickly offer optimism. However, a complete recovery will be hampered by damage to production facilities. The combination of fragile ceasefires and low inventory levels requiring rapid replenishment means oil prices are unlikely to return to $60 per barrel soon. Nevertheless, current prices are low enough to foster market optimism.

The primary beneficiaries of this normalization are energy importers, particularly developing Asian markets and Europe. Europe, initially favored by investors at the start of the year, lagged due to the oil crisis and the European Central Bank's stringent response to rising inflation. Lower energy prices are stabilizing the situation, improving prospects for traditional industries and increasing consumers' purchasing power. The ECB also has fewer arguments for further interest rate hikes, with markets anticipating one more increase by year-end, though the 'hawks' are losing ground.

Sector-wise, airlines and transport companies reacted first, with United Airlines' shares rising about 3% and Royal Caribbean's by over 4% on the day ceasefires were announced. Lower energy costs translate to better consumption outlooks for the second half of the year, providing US and European consumers with more disposable income for non-essential goods and giving cyclical sectors a positive boost. For industrial companies, this means reduced costs and better margins even without significant revenue growth. These trends are already reflected in the results of small-cap companies, with the S&P small-cap index outperforming the market by 10 percentage points in June. Conversely, the energy sector faces a different scenario. Companies extracting energy resources outside the Persian Gulf saw substantial gains during the crisis, but these unexpected profits are gradually shrinking. Since the announcement of the ceasefires, the S&P energy index has fallen by 6 percent.