Oil Climbs on U.S.-Iran Deal Uncertainty

Crude oil prices trended upward on Tuesday as market uncertainty regarding peace negotiations between the United States and Iran overshadowed a marginal recovery in maritime traffic. Brent and WTI futures both saw gains exceeding 1% as traders weighed the potential for further geopolitical escalation against an otherwise oversupplied global market. The situation remains critical for the energy sector given that the Strait of Hormuz typically handles approximately 20% of the world's daily oil and liquefied natural gas requirements.

Brent crude futures rose by $1.02, or 1.42%, to settle at $73.01 a barrel, while U.S. West Texas Intermediate (WTI) increased by 93 cents, or 1.36%, to reach $69.48. Saxo Bank analyst Ole Hansen noted that because a deal between Washington and Tehran has not been finalized, any inflammatory comments from either side continue to underpin prices and distract from bearish market fundamentals. Hansen indicated that if the situation escalates, the market could see prices move toward the $75 or even $80 levels in the near term.

Geopolitical tensions were fueled by a breakdown in rhetoric, with Iran's foreign minister declaring that talks would not proceed if U.S. threats persist. This followed a statement from U.S. President Donald Trump threatening to "finish the job" if a deal is not reached. Adding to the volatility, reports surfaced via Axios that Iran's Revolutionary Guards recently targeted commercial ships in the Strait of Hormuz with missiles. While these attacks resulted in significant vessel damage, no casualties were reported, though the incidents have contributed to a climate of extreme caution for regional shipping.

Despite some Japanese-owned supertankers resuming transit through the Strait to deliver Saudi Arabian crude, analysts from ANZ suggest the recovery of oil flows is stalling. Vessel crossings remain in the single digits, and a sustained recovery is not yet apparent. To mitigate these risks, Saudi Arabia is reportedly considering an expansion of its pipeline capacity to the Red Sea to bypass the Strait of Hormuz. This strategic move comes as the kingdom maintains relatively high pricing for its crude exports to Asia, even after implementing its largest price cut in over two decades.