US-Iran Tensions Spark Oil Price Surge Amid Peace Deal Impasse

Oil prices surged more than 3% on Tuesday as tensions between the US and Iran escalated over a proposed peace deal. The increase came after both sides rejected each other's negotiation proposals, with the US saying the ceasefire was 'on life support'.

The Brent crude futures price gained $3.47, or 3.3%, to $107.68 per barrel by 10:45 GMT, while U.S. West Texas Intermediate rose $3.54, or 3.6%, to $101.61.

Iran has demanded compensation for war damage and reiterated its sovereignty over the Strait of Hormuz, through which about a fifth of global oil flows. Disruptions to exports have prompted producers to curtail shipments, with OPEC oil output in April falling to its lowest level in over two decades.

KCM Trade analyst Tim Waterer warned that any escalation or renewed blockade threats could push Brent prices back above $115 per barrel. Meanwhile, some Chinese refiners are curtailing fuel production due to weak domestic demand and excess product.