Oil prices were up by about 5 per cent on Tuesday, as the market digested US President Donald Trump's comments that he has no plans to extend the two-week ceasefire Washington had brokered with Iran that expires on Wednesday.
Brent, the benchmark for two-thirds of the world's oil, climbed 4.41 per cent to $99.69 a barrel at 9.25pm UAE time, toying again with the $100 level. West Texas Intermediate, the gauge that tracks US crude, added 5.3 per cent to $94.36 per barrel.
Crude surged on Monday after the US Navy seized an Iranian-flagged cargo vessel in the Gulf of Oman, the latest escalation in a maritime stand-off that has choked one of the world's most critical energy routes.
That followed Iran shutting down the Strait of Hormuz once again on Saturday, blaming US “breaches of trust” over a naval blockade, which has so far redirected at least 25 commercial vessels away from Iranian ports.
Mr Trump has continued to issue conflicting updates on talks with Iran, using social media to promote diplomacy while lashing out at the mainstream media and his political opponents.
With uncertainty about whether the ceasefire with Iran will be extended beyond Wednesday, Mr Trump’s remarks added to the confusion. The fate of the second round of planned peace talks in Pakistan also remained unclear.
All this drama has caused oil prices to zigzag over the past few days.
Mr Trump refusing to extend the ceasefire beyond the deadline is “keeping geopolitical risk firmly in play” and “the outlook remains highly headline-driven”, said analysts at financial services firm Vantage Australia.
“The focus is shifting to whether talks can resume and help stabilise flows through the Strait of Hormuz … easing oil has helped steady broader markets, with the US dollar little changed,” they said.
However, oil prices are potentially past their peak, as the market seems to be taking a more pragmatic view on the conflict and “for good reason”, said Norbert Rucker, head of economics and next-generation research at Swiss bank Julius Baer.
“Geopolitics can be chaotic, especially during phases of conflict … looking beyond the past days’ volatility, most energy prices are down meaningfully from the current crisis’s highs posted in the end of March and early April,” he said.
“The easing observed more broadly on financial markets is not only expectation and investor-mood-driven but mirrors the easing in real-world energy markets.”
