Key Points:
- Trump extends ceasefire with Iran despite faltering peace talks.
- Strait of Hormuz remains blockaded, impacting global oil flows.
- Oil market volatility high due to Persian Gulf developments.
- Iran threatens to forcefully break the U.S. blockade.
Oil prices held onto recent gains after U.S. President Donald Trump extended a ceasefire with Iran. This happened even as peace talks stumbled and the critical Strait of Hormuz remained blocked, impacting oil shipments.
Brent crude, the international benchmark, traded below $99 a barrel, following a nearly 9% rise in the previous two trading sessions. West Texas Intermediate, the U.S. benchmark, hovered around $90. On Tuesday, Trump announced that the U.S. would pause new attacks on Iran. However, he also stated they would continue blocking ships connected to Iran until discussions conclude “one way or the other.”
In a post on Truth Social, Trump made it clear that lifting the blockade on the Strait of Hormuz before a deal with Iran would be impossible, unless the U.S. was prepared to “blow up the rest of their Country, their leaders included!” This strong language shows the high stakes involved in the ongoing standoff.
Oil markets have experienced significant swings due to the changing situation in the Persian Gulf and the near-total halt of shipping through Hormuz. This strait is a crucial waterway, normally carrying about one-fifth of the world’s crude oil. Market volatility has soared to its highest level since 2020, when the COVID-19 pandemic drastically reduced oil demand.
Rebecca Babin, a senior energy trader at CIBC Private Wealth Group, noted the rapid pace of news but stressed that “the barrels are still stuck in neutral.” She added that the back-and-forth about the ceasefire, potential blockade, and Iran’s role keeps markets nervous, but the key issue is that oil flows remain restricted.
Iran’s semi-official Tasnim news agency reported, citing sources, that Iran will not reopen the strait as long as the U.S. Navy keeps intercepting ships. Iran warned it would break the blockade by force if necessary. On Tuesday, the U.S. confirmed it stopped and boarded a sanctioned oil tanker, following the seizure of a cargo ship over the weekend, bringing the total to 28 vessels turned around.
Brent briefly jumped above $100 a barrel on Tuesday after reports emerged that U.S. Vice President JD Vance canceled a trip to Islamabad for peace talks. This came after Iranian media reported that Iran informed the U.S., via Pakistan, that it would not attend the talks. Futures then dropped after Trump’s comments about extending the ceasefire.
These negotiations were seen as a last-minute chance to calm tensions before the two-week truce ended and to clarify whether oil tankers could soon use the strait. Both sides still have many unresolved issues, including Iran’s nuclear program and Israel’s actions in Lebanon.
