Key Points:
- Oil prices are fluctuating as traders watch Middle East tensions.
- Trump and Netanyahu will meet on Wednesday to discuss Iran.
- US vessels are warned to avoid Iranian waters in the Strait of Hormuz.
- Crude oil is up 10% this year despite global surplus fears.
Oil prices bounced up and down on Tuesday as traders tried to guess what would happen next in the Middle East. The market is nervous about potential supply disruptions ahead of a high-stakes meeting between Israeli Prime Minister Benjamin Netanyahu and U.S. President Donald Trump. West Texas Intermediate crude traded just above $64 a barrel as investors monitored the situation.
The two leaders are scheduled to sit down on Wednesday. Investors expect Netanyahu to push Trump for a tougher stance against Iran, specifically regarding its ballistic missile program. Netanyahu stated he plans to present his specific views on negotiation principles directly to the president during their talks.
Crude oil prices have already jumped more than 10% so far this year. Frequent geopolitical conflicts have kept prices high, overshadowing concerns that there is actually too much oil in global storage. Traders are now waiting for new data from U.S. officials later on Tuesday to get a better look at market conditions.
Tensions remain high at sea as well. The U.S. government recently warned American-flagged ships to stay as far away from Iranian waters as possible when passing through the Strait of Hormuz. This narrow passage is a vital shipping lane for getting energy from the Middle East to the rest of the world. While Tehran has threatened to close it during past conflicts, they have not taken that extreme step yet.
Despite the military buildup, diplomatic talks are still happening. Analysts at RBC Capital Markets noted that both Washington and Tehran put a positive spin on recent discussions in Oman. This suggests that further negotiations are likely. Some regional observers believe Trump wants to avoid high oil prices, which might push him toward seeking a settlement.
The war in Ukraine is also keeping oil prices high. New intelligence assessments from Poland and Estonia warn that Russia has no intention of stopping its war. The report suggests President Vladimir Putin might use peace talks just to buy time, hoping to eventually get relief from sanctions while slowly restoring relations with Washington.
