Global oil prices surged more than 3 percent to start the week as diplomatic efforts to secure a permanent ceasefire between the U.S. and Iran hit a deadlock, raising fears of a prolonged disruption to global energy supplies.
“Oil prices have been volatile and can rise further if U.S.-Iran dealmaking remains thorny,” says Anthony Yuen, head of Energy Strategy at Citi Research, in a research report.
Front-month Brent crude oil futures were 3.2% higher at $104.50 a barrel in early Asian trading, while West Texas Intermediate crude futures rose 3.1% to $98.37 per barrel. The spike followed a social media post from former President Donald Trump on Sunday, who called Iran’s formal response to a U.S. proposal “Totally unacceptable” because it lacked commitments on rolling back its nuclear program.
The breakdown in talks heightens risks in a region already on edge. A fragile ceasefire has been tested by a series of drone attacks across the Gulf. The UAE’s Defense Ministry said it shot down two drones launched from Iran, while Kuwait also reported and responded to hostile drones in its airspace. Separately, a drone ignited a small fire on a ship off Qatar, an incident the Qatari Foreign Ministry called a “dangerous and unacceptable escalation.” These events threaten to unravel the truce that began on April 8 and escalate a conflict that has already seen Iran blockade the Strait of Hormuz, a critical artery for the global flow of oil and gas.
The primary sticking point remains Iran's nuclear ambitions. The United Nations' nuclear agency reports that Iran now possesses more than 440 kilograms of uranium enriched to 60% purity, a short technical step from the 90% needed for a weapon. Israeli Prime Minister Benjamin Netanyahu has stated the war isn't over until the enriched uranium is removed from Iran.
While Washington pushes for a deal that includes reopening the strait and dismantling the nuclear program, Tehran has sought to focus negotiations on ending the war on all fronts. The U.S. has maintained a blockade on Iranian ports, striking two oil tankers on Friday it claimed were attempting to breach the cordon. In response, Iran’s Revolutionary Guard has warned that any attack on its vessels would be met with a “heavy assault” on U.S. bases or ships in the region.
This article is for informational purposes only and does not constitute investment advice.
