Oil benchmarks firmed in early Asian trade as reports circulated that the U.S. had launched fresh strikes against targets in southern Iran, undercutting earlier optimism that a deal to reopen the Strait of Hormuz was close.
By 20:03 ET (00:03 GMT), Brent futures for July were trading up nearly 2% at $97.84 a barrel, while West Texas Intermediate futures gained 1.2% to $91.40 a barrel. WTI had not settled on Monday because U.S. markets were closed for a holiday.
Markets had reacted sharply the previous session after reports suggested a framework agreement between the U.S. and Iran to end hostilities and reopen the vital Gulf waterway, with Brent falling almost 3% on Monday. That decline was, however, constrained by a lack of clarity about the situation.
On Monday evening, media reports said U.S. forces struck missile launch sites and mine-laying boats in southern Iran. The U.S. military described the strikes as actions taken in self-defense and said a ceasefire with Iran remained in place.
Tehran's immediate reaction to those reported strikes was not clear. Observers noted that any fresh military activity would complicate the ongoing negotiations between the two nations, particularly given repeated Iranian warnings against further attacks.
Earlier commentary from the U.S. president had suggested progress in negotiations with Iran and included a claim that Tehran would relinquish its holdings of enriched uranium. Iran has largely denied plans to hand over its uranium, although reporting indicated the country was open to eventual talks over its nuclear activities.
The renewed reports of military action largely offset the wave of optimism that had driven Monday's deepening sell-off. With both diplomatic signals and on-the-ground events sending mixed messages, crude markets remain sensitive to updates from the Gulf and statements from the parties involved.
Summary
Reports of new U.S. strikes in southern Iran lifted crude prices in early Asian trade, reversing some of the market's earlier optimism after reports that a framework deal to reopen the Strait of Hormuz was near. Brent and WTI both rose, while uncertainty about Tehran's response and the future of negotiations persisted.
- Key points:
- Brent for July rose to $97.84 a barrel, up nearly 2%.
- WTI increased 1.2% to $91.40 a barrel; it did not settle on Monday due to a U.S. market holiday.
- Reports that the U.S. struck missile launch sites and mine-laying boats in southern Iran offset earlier reports of a framework deal to reopen the Strait of Hormuz.
- Sectors impacted: Energy and shipping sectors are directly affected, with potential knock-on effects for broader commodity markets and trade flows.
- Risks and uncertainties:
- Unclear Iranian response to the reported U.S. strikes could prolong regional tensions - affecting oil supply risk perceptions and shipping insurance costs in the Gulf.
- Ambiguity over the status of negotiations and whether Tehran will relinquish enriched uranium leaves the diplomatic path and prospects for reopening the Strait of Hormuz uncertain - creating volatility for oil markets.