Oil prices experienced an increase of nearly 1% on Tuesday amid fragile negotiations aimed at resolving the U.S.-Israeli conflict involving Iran. Tehran’s reaction to a proposal from Washington has underscored significant divisions that continue to fuel concerns over supply disruptions.
Brent crude futures rose by 86 cents, equivalent to 0.8%, reaching $105.07 per barrel, while U.S. West Texas Intermediate climbed 99 cents, or 1%, to $99.06 as of 0411 GMT. Both crude benchmarks had surged nearly 2.8% the previous day.
U.S. President Donald Trump remarked on Monday that the ceasefire with Iran was “on life support,” citing disagreements over multiple demands. These included halting hostilities across all fronts, lifting the U.S. naval blockade, allowing Iranian oil sales to resume, and addressing compensation for war-related damages.
Tehran has also reiterated its claim over the Strait of Hormuz, a critical passageway through which approximately 20% of the world’s oil and liquefied natural gas is transported.
“The hope for a swift peace agreement seems to be diminishing, and if no resolution is reached by the end of May, there will likely be upward pressures on oil prices,” stated Suvro Sarkar, the head of the energy sector team at DBS Bank.
Concerns regarding disruptions, particularly from the near-closure of the strait, have led producers to reduce exports. A recent Reuters survey revealed that OPEC’s oil output in April plummeted to its lowest level in over twenty years.
Tim Waterer, chief market analyst at KCM Trade, noted, “A significant breakthrough in peace negotiations could lead to a rapid price correction of $8 to $12, whereas any escalation or threats of renewed blockades could quickly push Brent prices back above $115.”
Amin Nasser, CEO of Saudi Aramco, warned on Monday that disruptions to oil exports through the strait could prolong the return to market stability until 2027, with an estimated loss of around 100 million barrels of oil per week.
On the supply side, analysts participating in a Reuters poll anticipated that U.S. crude inventories would decrease by approximately 1.7 million barrels in the previous week.
This anticipated decline occurs in the context of sustained strong net waterborne export volumes for crude and related products expected over the coming weeks, according to Walt Chancellor, an energy strategist at Macquarie Group.
Additionally, market players are closely monitoring Trump’s upcoming meeting with Chinese President Xi Jinping on Wednesday, particularly following Washington’s recent sanctions on three individuals and nine companies involved in facilitating Iranian oil shipments to China.
