Oil prices rise as Iran suspends co-operation with IAEA

Tehran moves closer to suspending co-operation after blaming UN watchdog over US strikes

International Atomic Energy Agency director general Rafael Grossi. The IAEA says it is waiting to hear from Iran. Reuters

Oil prices rose more than 1 per cent on Wednesday after Iranian President Masoud Pezeshkian approved a law suspending co-operation with the UN's nuclear watchdog.

The International Atomic Energy Agency (IAEA) said it is "aware of these reports and is awaiting further official information from Iran", a representative told The National on Wednesday.

Brent, the benchmark for two thirds of the world’s oil, was up 1.34 per cent to $68.01 per barrel at 8.02pm UAE time on Wednesday.

West Texas Intermediate, the gauge that tracks US crude, rose 1.25 per cent to $66.27 a barrel.

"Iran’s decision to cut communication with UN nuclear inspectors has added fresh ambiguity to regional dynamics, despite signs of a temporary ceasefire agreement between Israel and Gaza," Soojin Kim, research analyst at MUFG Bank, said on Wednesday.

Iran's decision follows US air strikes on three of the country's nuclear sites. The law had been passed by Iran’s parliament and approved by a constitutional watchdog.

After the law's passage, Iran's Supreme National Security Council will oversee its implementation. The council has not said anything publicly, but Mr Pezeshkian is its head, so his reported order signals that the law will be implemented.

The IAEA has monitored Iran's nuclear energy programme for years. Tehran claims the programme is for peaceful, civilian purposes but western powers suspect Iran is seeking to build a bomb. Tensions came to a head last month when Israel launched air strikes on Iran to hammer its nuclear infrastructure.

The US then entered the conflict by sending B-2 bombers to drop “bunker-buster” munitions on three Iranian nuclear sites during the 12-day war, which ended in a ceasefire last Tuesday.

IAEA director general Rafael Mariano Gross said last month that his warnings about Iran's secretive activities "could never be conceived as a justification" for war. Mr Grossi has repeatedly said he cannot be sure that the Iranian nuclear programme is peaceful.

Opec+ meeting

Oil prices also rose on Wednesday as traders considered expectations of a supply increase from major producers next month.

"Crude futures trading has quietened since recent geopolitical spikes, with focus now shifting back to fundamentals, including a possible Opec+ output hike this weekend and concerns about oversupply later this year," Ms Kim said.

The Opec+ group is scheduled to meet on Sunday and the market is waiting to see if there will be another hike in August, similar to those agreed for May, June and July.

"Given that the Israel-Iran ceasefire continues to hold, focus has now turned back to the longer-running narratives of relatively weak global demand, and a market that remains over-supplied," said Michael Brown, senior research strategist at Pepperstone.

"On the latter front, recent reporting indicates that Opec+ are set to continue with plans to unwind all of the 2.2 million barrels per day voluntary cuts by the fourth quarter, as a war for market share, as opposed to a battle over price continues."

These output increases come as the US also seeks to increase production, with President Donald Trump continuing to call for "drill baby, drill!"

"Against that backdrop, and with geopolitical risk having now been entirely priced out, the balance of risks points towards further downside for crude benchmarks from here on in, particularly as global manufacturing shows few signs of staging a significant recovery for the time being," Mr Brown said.