Oil Resumes Advance as Markets Fear the Middle East War May Escalate
Oil prices pushed higher in another choppy session, clawing back part of Monday’s steep drop as markets stayed focused on the risk of escalation in the Middle East war and the continued chokehold on crude flows through the Strait of Hormuz.
Brent climbed back above $100 a barrel after plunging 11% on Monday when U.S. President Donald Trump delayed — for five days — a threat to strike Iran’s energy infrastructure, claiming the U.S. was in talks with Tehran to end the conflict. Iran denied negotiations were taking place, and fighting between the U.S.-Israeli alliance and Iran continued without signs of easing. U.S. benchark WTI advanced around 3%.
Prices pared some gains after Xinhua reported that Chinese Foreign Minister Wang Yi urged all parties to seize every opportunity for peace and begin talks as soon as possible. Still, traders remained wary as physical supply risks persisted.
Several Gulf Arab neighbors are said to be considering joining the U.S.-Israeli campaign against Iran — but only if Tehran follows through on threats to strike critical Gulf power and water infrastructure, according to people familiar with the matter. The high threshold underscores both the sensitivity and the potential for the conflict to broaden if regional infrastructure becomes a target.
Iran has also begun charging transit fees on some commercial vessels passing through Hormuz, another sign of Tehran’s leverage over one of the world’s most important maritime energy channels. RBC Capital Markets analysts including Helima Croft said it remains unclear how far back-channel talks have progressed — or whether the Islamic Revolutionary Guard Corps is inclined to settle while it retains firm control of Hormuz. “Ships, not soundbites, will likely be what ultimately matters for physical markets,” they wrote.
Brent has risen about 40% this month on concern that hostilities between the U.S., Israel, and Iran will trigger a global energy crunch and stoke inflation. The war has severely constrained transit through Hormuz, forcing Persian Gulf producers to cut millions of barrels per day of output. Refined products such as diesel and jet fuel have rallied even more sharply than crude, squeezing consumers and unsettling governments.
The fallout has continued to spread globally. Chile is set to raise fuel prices by as much as half, while in Asia Japan ordered a review of its entire supply chain for oil-related products and is said to have made inquiries about potential intervention in crude oil futures markets. Elsewhere, Thailand raised diesel prices, China’s biggest refiner said it would prioritize domestic supply, and the Philippines warned that grounding aircraft due to jet-fuel shortages is a “distinct possibility.”
Speaking at the CERAWeek by S&P Global conference in Houston on Tuesday, Shell CEO Wael Sawan said the physical disruption could spread to Europe from Asia as early as next month.
In the latest pricing update, WTI for May delivery rose 3.60% to $91.30 a barrel at 11:09 a.m. in New York, while Brent for May settlement gained 2.88% to $102.82.
Over the weekend, Trump had threatened to bomb Iran’s energy infrastructure unless Hormuz was fully opened within 48 hours. People familiar with the diplomacy said the pause was seen as an effort to manage oil prices — a link Trump acknowledged on Monday. “The price of oil will drop like a rock as soon as the deal is done,” he said.
Repeated shifts in messaging from the U.S. president have left investors fatigued, dampening volumes as traders sift through a near-constant stream of sometimes contradictory headlines. Four of the six largest moves ever seen in Brent futures have occurred since the conflict began.
Goldman Sachs also warned that if the shock lasts longer, the extreme tightness currently concentrated in the Middle East and Asia could spread more broadly. Co-head of global commodities research Daan Struyven said that eventually, some form of demand destruction may be needed to rebalance the market.
Source : Newsmaker.id
