Oil Set for Weekly Drop, Trump Affirms Iran Ceasefire Still in Place
Oil prices are headed for a weekly decline after US President Donald Trump declared a ceasefire with Iran is still holding despite renewed clashes, maintaining hopes that a deal could be reached. Brent traded relatively steady around US$100 per barrel, but remains on track for a weekly decline of around 7%.
According to the US Central Command, US forces struck military targets in Iran after Iran fired on three destroyers in the Strait of Hormuz. However, US authorities emphasized that they are not seeking escalation. Trump also said the three warships successfully exited the shipping lane and were undamaged, reiterating to reporters in Washington that the ceasefire remains in place.
The oil market remains focused on the Strait of Hormuz, which has been effectively closed since the war began in late February. This has triggered an unusual supply shock as oil flows have been disrupted and wells in the region have been shut down, in a situation described as a “double blockade” in which Iran is obstructing traffic while the US is preventing ships calling at Iranian ports from leaving or entering. In terms of pricing, the market views oil as moving between two risks: the opportunity for diplomacy on the one hand and the potential for renewed escalation on the other, so the war premium has not completely disappeared.
Volatility increased throughout the week, with Brent briefly soaring near US$115 per barrel on Monday following Iranian attacks on ships and energy infrastructure in the United Arab Emirates, amid US efforts to redirect ships through Hormuz. Prices then eased as the Trump administration awaited Tehran's response to its proposal to reopen trade routes, while Iran has yet to signal its acceptance of those terms.
Adding to the complexity, Iran announced it seized a tanker in the Gulf of Oman, and the United Arab Emirates reported its air defense system intercepted missiles and drones. Going forward, the market will monitor the operational status of Hormuz, Iran's response to the US proposal, as well as any indication of physical supply disruptions and regional risks that could further increase volatility.
Source: Newsmaker.id
