Vance Says Iran Must Cut Nuclear Enrichment to End Conflict with U.S.
On October 7, Brent crude oil prices rose to around $101.50 per barrel during Asian trading hours. The movement came as U.S. Vice President JD Vance provided new insights into the U.S.-Iran negotiations, which are influencing the geopolitical risk premium in the oil market. Vance emphasized that Iran must make "meaningful" reductions to its nuclear enrichment capabilities to meet U.S. demands and end the ongoing seven-month conflict. He stated, "If you don't want nuclear weapons, why do you need 60% enriched fuel?" highlighting the core U.S. demand for substantial cuts in Iran's nuclear enrichment capacity.
Vance's remarks underscored the complexity of the negotiations, noting that the U.S. is uncertain about Tehran's decision-making process. He mentioned that while the U.S. is engaging with Iranian President Pezeshkian and Foreign Minister Araghchi, it remains unclear how much influence they have, especially after a joint U.S.-Israeli strike reportedly killed Supreme Leader Khamenei. This uncertainty adds another layer of difficulty to the already challenging negotiations.
On the battlefield, Vance downplayed concerns about a critical ammunition shortage, asserting that Iran is largely unable to halt energy exports through the Strait of Hormuz. This assessment suggests that the tail risk of supply disruptions may be lower than previously feared, potentially exerting downward pressure on oil prices. However, Vance also noted that President Trump rejected Tehran's latest proposal and warned of potential military escalation after the midterm elections, keeping the risk of negotiations collapsing alive.
The implications for Brent crude oil futures are significant. If the U.S. and Iran reach a deal and the Strait of Hormuz reopens, the geopolitical risk premium could dissipate, pushing prices below $100 per barrel. Conversely, if the conflict escalates, oil prices could rebound sharply. Overall, Vance's remarks suggest that Brent crude is likely to remain range-bound around $100 per barrel in the near term.