Oil price fluctuates ahead of Trump’s Iran deal deadline
Oil price fluctuates ahead of Trump’s Iran deal deadline
Global oil prices have seen volatile movements as the US presidential deadline looms for Iran to secure the Strait of Hormuz passage. Brent crude benchmark prices surged past $111 (£84) early Tuesday, fluctuating around the $110 per barrel range before stabilizing at approximately $107.
On Monday, Trump issued a stark warning, stating that Iran could face a ‘one-night’ strike if a deal with the US wasn’t reached by 20:00 Washington DC time on Tuesday (00:00 GMT/01:00 BST Wednesday). Middle Eastern energy exports have faced significant delays due to Tehran’s threat of vessel attacks, stemming from US and Israeli strikes since February 28th.
At the White House, Trump asserted that ‘reasonable’ Iranian leaders were engaging in ‘good faith’ negotiations, though the final result remains unclear.
US stock markets began the day with modest declines and experienced erratic trading following Trump’s intensified threats on Tuesday morning. “Entire civilizations could face annihilation tonight, never to be restored. I don’t want that to happen, but it probably will,” he posted on social media.
The Nasdaq closed up 0.1%, the S&P 500 remained unchanged, and the Dow dropped by 0.2%. Iran has consistently rejected temporary ceasefire offers, insisting on an end to the war and the removal of sanctions. Ye Lin of Rystad Energy noted that Tuesday’s oil price increase indicates investors anticipate challenges in securing a deal, citing Iran’s rigid position and the potential for prolonged conflict.
Meanwhile, traders are assessing whether Trump’s current stance signals genuine intent for a deal or if it’s merely a ‘smokescreen’ for a more substantial military action, according to Tineke Frikkee of W1M.
Tineke Frikkee of W1M added that even if an agreement to end the conflict soon is reached, economic benefits will take time to materialize. “Oil flows could start coming through the Strait of Hormuz a bit quicker, but they will take some time to reach their destination,” she told the BBC’s Today programme. “For other commodities, like liquid natural gas, for example, facilities have been turned off, so it will take three to four months to get them back online.”
The escalating tensions prompted Jamie Dimon, CEO of JPMorgan, to caution that rising global interest rates may follow as inflation pressures mount from the ongoing conflict. As Trump’s deadline approaches, several Asian nations have brokered agreements with Iran to ensure their vessels can traverse the strait, given their reliance on Gulf energy supplies.
Though some vessels have navigated the strait recently, the volume has significantly dropped compared to pre-conflict levels. Trump has also urged countries to send warships to the region to ensure more vessels can safely pass through the waterway. The UK hosted a meeting of allied military planners and partners from over 30 countries to discuss measures to secure the Strait of Hormuz once the conflict is over, with plans to hold another session. Disruptions in the key shipping route have pushed up energy costs worldwide and raised concerns about higher inflation globally. Around a fifth of the world’s oil and gas shipments usually pass through the narrow waterway, with Asian economies like Japan and South Korea particularly affected by the reduced flow.
