Oil Rebounds as US Strikes on Iran Cloud Strait of Hormuz Deal
By Aboki Forex —
Oil prices bounced back on Tuesday after fresh US military strikes against Iran raised doubts about reopening the Strait of Hormuz. Global benchmark Brent crude rose toward $100 per barrel, recovering from a more than 7% slump on Monday. West Texas Intermediate traded near $93.
US Central Command said its forces hit missile-launch sites and boats attempting to lay mines near the strait. Iranian media had earlier reported explosions in the area.
Negotiations between Washington and Tehran will still take a few days, according to US Secretary of State Marco Rubio. Speaking in India on Tuesday, Rubio said both sides are discussing language in an initial document. Iran's Supreme Leader declared that the Middle East will no longer serve as a shield for US military bases.
Crude had fallen sharply on Monday after President Donald Trump posted that talks were proceeding nicely. He also threatened more attacks if negotiations fail. The drop followed a week of softening prices as peace prospects improved and ships began leaving the strait.
Oil prices rallied in March and April but are now on track for a decline in May. The fragile ceasefire and push to reopen the Strait of Hormuz are outweighing signs of fast-depleting global stockpiles.
The strait remains largely closed. It is the key waterway through which a fifth of the world's oil and liquefied natural gas flowed before the crisis. Both the US and Iran have imposed blockades.
The two sides are negotiating a deal to extend the ceasefire for about two months. Washington would lift its blockade, and Tehran would reopen the strait. But sticking points remain. Tehran insists it must manage traffic through the chokepoint, something the US, Arab states, and Europe reject.
Saul Kavonic, senior energy analyst at MST Marquee, said it is premature to assume a peace deal will be reached or followed. He noted that both sides have claimed negotiation success or strait reopening in the past few months, only for it to fall through.
With the Strait of Hormuz still largely shut, global oil inventories are drawing at a record pace, according to the International Energy Agency. US commercial and strategic petroleum holdings have been contracting at an unprecedented rate.