Iran denies final deal as US-Iran strikes escalate for 2nd day

Iran denied reaching any final agreement with the US on Thursday, hours after Trump claimed a "great settlement" was days away, as American airstrikes entered a second day and Tehran declared the Strait of Hormuz closed.

"So far, Iran has not reached a final decision regarding any agreement," Esmail Baghaei, spokesperson for Iran's Foreign Ministry, said, according to state news agency IRNA, adding that reports of a finalized deal were "mere speculation." He confirmed that Qatar and Pakistan were "active as mediators" but noted that "US actions are affecting the diplomatic process."

The contradiction came as the US military struck multiple targets in Iran for a second consecutive day, with Defense Secretary Pete Hegseth vowing to "negotiate with bombs" if necessary. Iran retaliated by launching missiles at the US Fifth Fleet in Bahrain and air bases in Kuwait and Jordan, while declaring a complete closure of the Strait of Hormuz — a chokepoint that handles about 21 percent of global oil trade. The escalation pushed US consumer price inflation to 4.2 percent in May, the highest since April 2023, as energy costs surged on supply disruption fears.

The standoff leaves global oil markets facing a prolonged supply squeeze, with the Strait of Hormuz closure threatening to remove millions of barrels per day from the market. Trump said a memorandum of understanding could be signed in Europe as early as this weekend, with Vice President JD Vance attending on his behalf, but Iran's denial and continued military exchanges suggest any diplomatic resolution remains fragile.

The rift between Washington and Tel Aviv has further complicated the picture. Israeli Prime Minister Benjamin Netanyahu was not warned in advance before Trump publicly announced he had canceled scheduled strikes, according to Axios, and learned of the development only after it entered the public domain. Trump told the Financial Times this week that Netanyahu "won't have any choice" on the Iran deal, adding: "I call the shots. He doesn't call the shots." Netanyahu's office later said it welcomed assurances that any final agreement would address Iran's nuclear capabilities, including the removal of enriched material and limits on missile production.

The last time the US and Iran engaged in sustained direct military exchanges was in early 2020, following the drone strike that killed Qassem Soleimani. In that episode, Brent crude spiked above $70 a barrel within days before retreating as diplomatic channels reopened. This time, the stakes are higher: Iran's declared closure of the Strait of Hormuz has already disabled eight merchant vessels attempting to transport Iranian oil, including the Palau-flagged M/T Settebello, which was hit by precision munitions in its engine room. Trump claimed US forces had secretly moved "millions of barrels of oil" through the strait on 22 ships traveling at night with no lights.

The Gulf Cooperation Council condemned what it called "new heinous Iranian aggression" against Bahrain, Kuwait and Jordan, saying the attacks "do not create stability." UN Secretary-General António Guterres warned the Security Council that escalating rhetoric and attacks risked "full war" in the Gulf region, calling for a complete ceasefire and the restoration of navigational rights. Iran's UN envoy, Amir Saeid Iravani, told the council that "no sustainable deal can be reached through threats, intimidation, or the use of force."

The economic toll is mounting. Trump called the 4.2 percent inflation reading "great," arguing that higher energy costs tied to the Iran war were the primary driver and that prices would ease "as soon as this war is over." But with the Strait of Hormuz effectively closed and no ceasefire in sight, consumers face elevated gasoline and heating oil prices with no near-term relief.

For oil markets, the immediate risk is a sustained disruption to the 17 million barrels per day that transit the Strait of Hormuz. The US Treasury imposed fresh sanctions on nine Chinese and Hong Kong-based people and firms accused of supporting Iran's weapons procurement program, while Trump signed a $70 billion immigration enforcement bill that includes funding for continued military operations in the region. Rami Khouri, a Palestinian American journalist and fellow at the American University of Beirut, said the US "doesn't know how to get out of this" and predicted a continuation of tit-for-tat military strikes.

This article is for informational purposes only and does not constitute investment advice.