Tensions in Middle East to add volatility in Crude

• Conflicts between Iran and Saudi Arabia move to new heights over the weekend, as Arab leaders announced joint military forces to tackle Shite rebels, who are backed by Iran.

It's now a game of patience as deadline looms over nuclear talk. 31^st March, tomorrow is previously announced deadline to reach an agreement between Iran and the world powers.

• Over the weekend, Egypt announced to form a joint group for military intervention to prevent a Shia government backed by Iran in Yemen.

• In the meantime, Saudi Arabia is continuing bombardments in Yemen, over rebel positions. Talks suggests it might consider ground troops.

Market impact -

• Oil failed to gain much traction from the Middle East tensions, after first day's rise of near 5%.
  
• However, recent price actions and options market suggest that both realized and implied volatility is on the rise.
  
• Iran's response has so far been mute as it negotiates the nuclear deal, but that might change over coming months.
  
• Next few days and weeks are vital for oil, as tensions in the region might add to upward pressure on oil, whereas a successful Iran negotiations would add to the downside.

As a net result Brent oil, which is trading at $56/barrel with a premium of $7.8/barrel over WTI would remain very volatile.

Brent might also attempt for an increase in spread with WTI.

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