US-Iran Peace Hopes Fade, Oil Prices Surge
Oil prices have risen for a third straight session as hopes of a US-Iran peace deal fade. On Tuesday, Brent crude futures were up 36 cents at $91.23 a barrel, while US West Texas Intermediate crude futures were up 56 cents at $85.06 a barrel.
The increase comes after Tehran said it would adopt a more offensive stance and Washington ruled out extending a ceasefire deal. This has halted progress on peace talks and the resumption of oil tanker traffic through the strategic Strait of Hormuz, threatening to extend the conflict that the United States and Israel launched with attacks on Iran on February 28.
Iran will keep the strait closed until the US meets the conditions of the interim deal signed in June, according to top Iranian negotiator Mohammad Baqer Qalibaf. Trump said talks between Washington and Tehran were neither taking place nor scheduled, but the Strait of Hormuz was open.
Economist Mohit Kumar at brokerage Jefferies says that Iran and Trump are not yet at 'pain points' where they would seek to make a deal, predicting further pain in the near term and upward pressure on oil prices. DBS Bank's head of energy research Suvro Sarkar also warns of an impact on oil price expectations further out in 4Q and even in 2027.
Oil is still escaping Hormuz, but crossings are in single digits. Saudi Aramco has resumed oil loadings from inside the Strait of Hormuz, while offering cargoes for loading via ship-to-ship transfers off Fujairah in the UAE. Iran says it is close to an agreement with Oman on managing the Strait of Hormuz.