Jan von Gerich on oil: “It is not a realistic estimate to stay at these levels”

The situation in the Middle East had already remained in the background in the market, but now it has come to the fore again, when the conflict between the United States and Iran has intensified and the price of oil has gone up, Nordic chief analyst Jan von Gerich says.

On Monday, the price of Brent oil hovered around 88 dollars.

At the moment, the oil market is more sensitive to shocks than a few months ago, when the closure of the Strait of Hormuz began. Back then, there were factors that kept the market functioning, such as alternative transport channels and safety warehouses, explains von Gerich.

“According to many estimates, the situation is now more tense than before. Something can probably still be released from the reserve stocks, but there is not as much oil in the stocks as before.”

He still sees that the market still believes in a relatively quick peace.

“If peace doesn’t come, prices have room to rise.”

Of course, the same also applies in the other direction. Von Gerich sees that if there is peace, there will be a return to the broader trends of the oil price and the price will turn down.

“It is not a realistic estimate to stay at these levels.”

However, assessing and predicting the future is difficult in an uncertain situation, which is clearly visible in, for example, interest rate policy.

“The European Central Bank, the ECB, has pointed out that there is so much uncertainty that interest rate decisions have to be made on a meeting-by-meeting basis.”

In von Gerich’s opinion, the ECB justified the decision to raise interest rates in June in an exceptional way by appealing to the fact that in all scenarios the calculations favor interest rate increases. This concretely shows that relying on one basic scenario is more difficult.

“This is a difficult environment for all of us because the situation can change very quickly.”

The second coming of Deepseek

Another thing that moved the market is the Chinese one announced last Friday Moonshot-company’s new artificial intelligence model. The new model has raised concerns about whether the massive investments by US firms are overkill if the Chinese can get similar results cheaper and without the latest computing hardware.

Von Gerich considers the news significant and compares it to the recent release of the Chinese Deepseek model.

“When Deepseek came, there were big moves.”

On the other hand, von Gerich sees that the need for data centers is not disappearing. In the past, it has also been thought that data center investments would depend on company valuations, but according to von Gerich, there are no indications of this either.

“The prices of the Power Seven haven’t risen in the same way as before, but it still hasn’t frozen investments.”

So we haven’t seen a big correction in the market or in the macro-economy yet. However, relative changes within the market and between companies can occur, von Gerich believes.

Finland’s economy endures

In general, the economy has withstood the oil shock relatively well, von Gerich estimates.

“There hasn’t been a disaster. If you compare the situation with the start of the Russian war of aggression, then it was a miracle that the growth didn’t go into the negative.”

On the other hand, for example, a clear downward pressure can be seen in the Purchasing Managers’ Index for the European region, which also partly reflects the effects of rising energy costs, von Gerich estimates.

In Finland, the high cost of energy does not cause the same problems as, for example, in Germany, which is much more dependent on fossil fuels.

“Finland has done the right things. Here, the share of gas is very small and the share of fossil fuels in energy production in general has decreased. Here, the vulnerability of the economy to higher prices is not so great.”

For example, in Germany, a large euro economy, things have gone rather in the opposite direction, and there expensive energy causes much bigger problems, von Gerich opens.

“Here you can see the clear benefits of Finland’s green energy policy.”

On the other hand, multiplier effects from the moods in the rest of the euro area are still carried over to Finland, von Gerich reminds.

“Through exports, it is also reflected in the Finnish economy, and in that sense we are in the same boat as Germany and the rest of the euro area.”