Oil rose after US President Donald Trump rejected Iran’s response to his latest peace proposal, prolonging the effective closure of the crucial Strait of Hormuz.
Brent crude futures advanced as much as 4.6% to near $106 a barrel, before paring gains, while West Texas Intermediate traded near $98. In a social media post, Trump said Tehran’s response was “TOTALLY UNACCEPTABLE” as the two sides struggle to maintain a fragile ceasefire in their 10-week war.
The near-halt of traffic through Hormuz during the conflict has choked off shipments of crude, gas and fuels to global customers, driving up energy prices and raising inflation fears. Saudi Aramco Chief Executive Officer Amin Nasser said the oil market is losing 100 million barrels every week and that if the disruption continues into June, the market will only return to normal next year.
“There’d been an expectation that some of the diplomatic channels were going to produce some more positive results,” Emily Ashford, head of energy research at Standard Chartered, said in a Bloomberg Television interview. “We’re still back in that stalemate situation and every day, every week that passes is more barrels lost.”
Iranian Response
Tehran offered to transfer some of its stockpile of highly enriched uranium to a third country, but rejected the idea of dismantling its nuclear facilities, the Wall Street Journal reported. Iran disputed the report, according to semi-official news agency Tasnim.
While there has been a trickle of vessels transiting Hormuz — with the UAE and Saudi Arabia sneaking several tankers out and Qatar sending a shipment of liquefied natural gas — flows remain just a fraction of what they were before the war.
A drone strike Sunday that briefly set a cargo vessel ablaze off Qatar showed shipping remains highly dangerous. The United Arab Emirates and Kuwait also said they had intercepted hostile drones.
Wall Street is growing increasingly convinced that passage through Hormuz will remain impaired into the second half of the year. A majority of respondents to a Goldman Sachs Group Inc. survey expected flows through the strait to be disrupted beyond the end of June.
In an interview on CBS’s 60 Minutes on Sunday, Israeli Prime Minister Benjamin Netanyahu warned that the war with Iran is “not over.” He said there’s more work needed to dismantle the country’s nuclear capability and to remove its stockpile of highly enriched uranium.
Trump is scheduled to meet Chinese President Xi Jinping this week, and US officials said Sunday that he’s expected to press his counterpart over China’s approach to Iran. Revenue that Beijing provides to Iran, as well as potential weapons exports, would be among topics discussed.
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