Persian Gulf crude exports recovered to above 14 million barrels per day last week, about 80% of pre-war levels, helped by flows through the Strait of Hormuz and bypass routes. At the same time, the G7 is coordinating releases of up to 100 million barrels of diesel, crude and other reserves via the IEA, with early volumes tilted towards diesel where shortages are tighter. Against that supply boost, Saudi Arabia’s East–West pipeline—used to route crude to the Red Sea without Hormuz—was reported attacked near Khurais, prompting a halt in pumping, while satellite imagery has shown fire damage in earlier strikes and a new smoke plume. WTI is holding a 90–92 support zone but remains capped by the 50 EMA; a break below 90 would put 88 and then 80–82 in view, while a sustained move back above the 50 EMA would point to rising geopolitical risk.
In Europe, renewed focus on French fiscal risk is feeding into bond spreads and the euro. Sumitomo Mitsui DS Asset Management sold its entire French government bond position, reallocating most proceeds into German Bunds and some into short-term Japanese government bonds, as German 10Y yields move lower while French 10Y yields stay elevated. The euro’s weakness against the yen has left EURJPY constrained by its daily 50 EMA, linking the move to risk aversion and a preference for perceived safe-haven debt.
French Fiscal Risk Drives Bond Spreads And Currency Markets
Noble yields on French 10-year sovereign bonds have recently pushed the spread over safer German Bunds to multi-year highs, hovering around 75 to 80 basis points amid persistent concerns over France’s fiscal trajectory. We believe derivative traders should monitor this spread closely, as any further widening past the 85-basis-point mark could trigger aggressive short positions on the euro. This widening reflects a broader capital flight, confirmed by major Asian institutional investors reallocating capital away from French debt and into Japanese Government Bonds and German Bunds.
For currency traders, we suggest focusing on EUR/JPY, which remains heavily suppressed below its daily 50-period Exponential Moving Average. With Japan’s benchmark 10-year yield hovering near 0.95% to 1.0% and acting as a relative anchor, the yen is capturing safe-haven flows away from European fiscal instability. If the euro fails to reclaim its short-term moving averages against the yen in the coming weeks, we see a clear path for further downside momentum toward key psychological support levels.
Energy Market Technicals, Geopolitical Risks, And Diesel Outperformance
In the energy markets, we are watching a critical technical battleground as West Texas Intermediate crude fluctuates around the $90 to $92 support zone. Although Persian Gulf exports have recovered significantly to over 14 million barrels per day, fresh security threats to Saudi Arabia’s East-West pipeline near Khurais keep supply lines incredibly fragile. We recommend trading this range conservatively, looking for a clean break below $90 to target the $88 level, or a sustained daily close above the 50 EMA to signal that geopolitical risk premium is returning.
Meanwhile, we see more immediate, clean-trending opportunities in diesel and middle distillate crack spreads rather than raw crude. The planned release of up to 100 million barrels of emergency reserves by G7 nations is heavily weighted toward diesel, yet refining margins remain highly resilient due to structural bottlenecking. If diesel prices continue to hold above their 4-hour Bollinger Band midlines, it confirms that structural logistics issues are overriding the temporary supply relief, presenting a strong relative-value long play against crude.
