Oil jumps over 2% as Iran standoff deepens, Hormuz shipping stalls
Oil settled up over $2 on Monday as diplomatic efforts to end the Iran war stalled and shipping through the Strait of Hormuz slowed sharply.
Oil prices climbed more than 2% on Monday, with Brent crude settling at $90.87 a barrel and U.S. West Texas Intermediate at $84.50, as investors grew increasingly pessimistic about a diplomatic resolution to the Iran conflict.
President Donald Trump hardened his stance, telling reporters that the U.S. would not extend its memorandum of understanding with Iran and demanding Tehran's surrender. He also warned that the U.S. would bomb Oman if it interfered with American military action.
A senior Iranian official said Tehran would escalate tensions in the Strait of Hormuz and beyond, and launch an attack, if the U.S. failed to fully implement an interim peace deal within weeks.
Ship-tracking data from Kpler showed just five commodity vessels transited the strait on Saturday and none on Sunday, compared with 31 over the prior weekend. Before U.S.-Israeli attacks on Iran began in late February, the waterway handled roughly one-fifth of global oil and liquefied natural gas supplies.
"As the rhetoric heats up, so do the prices," said Phil Flynn, senior analyst at Price Futures Group, noting that uncertainty about ships crossing Hormuz is building concern in the market.
Still, analysts at SEB Research said prices are unlikely to move substantially higher unless there is a halt in the current flow of crude out of the strait at night or a closure of the Bab el-Mandeb Strait. For now, traders are weighing the risk of deeper disruption against the possibility of a resolution that reopens Hormuz and sends prices sharply lower.
U.S. Energy Secretary Chris Wright said the president is "playing the long game," adding that Iran cannot export oil right now and that the world does not need Iranian crude. He said he would talk to U.S. refiners about boosting fuel production to lower gasoline prices.
Meanwhile, Abu Dhabi National Oil Company sold at least 14 million barrels of spot crude to Asian refiners at premiums in its latest tender, and Saudi Aramco is offering crude outside the strait to some Asian buyers. U.S. Strategic Petroleum Reserve stocks fell to their lowest level since December 1982, part of a planned release of 172 million barrels.