Oil Prices Rebound as US Strikes in Iran Cloud Hormuz Deal Talks

TLDR

• Oil prices rebounded Tuesday after US military strikes on Iranian missile sites and mine-laying boats
• Brent crude rose above $98 a barrel after falling more than 7% Monday
• Secretary of State Rubio says a deal could still “take a few days”
• The Strait of Hormuz remains largely closed, disrupting roughly a fifth of global oil supplies
• Global oil inventories are drawing at a record pace, according to the IEA

Oil prices climbed on Tuesday after the US carried out fresh military strikes against Iranian targets, clouding hopes that a deal to reopen the Strait of Hormuz was close.

Brent crude rose above $98 a barrel, recovering after a drop of more than 7% on Monday. West Texas Intermediate was trading near $92 a barrel.

US Central Command said forces struck missile-launch sites and boats attempting to lay mines in southern Iran. The military described the action as “self-defense” and said a ceasefire remained in place.

Tehran warned that any attacks on Iranian military targets would be met with retaliation. No Iranian counterattacks were reported as of Tuesday.

Where the Hormuz Deal Stands

Negotiations between the US and Iran are ongoing, but no agreement has been reached. Secretary of State Marco Rubio told reporters in India on Tuesday that talks would “take a few days” as both sides work through language in an initial document.

The proposed deal would extend the ceasefire for roughly two months. Under the framework, Washington would lift its blockade and Iran would reopen the Strait of Hormuz.

Key sticking points remain. Iran says it must be allowed to manage traffic through the strait. The US, along with Arab states and Europe, says that cannot be permitted.

On the nuclear issue, President Trump said Iran’s enriched uranium should ideally be destroyed inside Iran, or handed over to the US. Iran has largely denied plans to give up its uranium holdings but has shown some openness to future talks on the matter.

Israel added another layer of difficulty, saying Monday it would step up strikes against Iranian-backed Hezbollah in Lebanon. Iran has demanded an end to those hostilities as part of any deal.

Impact on Global Oil Supply

The Strait of Hormuz carried roughly a fifth of the world’s oil and liquefied natural gas during peacetime. It remains essentially closed, subject to blockades by both the US and Iran.

The International Energy Agency says global oil inventories have been drawing at a record pace. In the US, commercial and strategic reserves combined have been falling at an unprecedented rate.

Higher energy costs have fed into inflation, creating pressure on central banks. The European Central Bank’s Isabel Schnabel said the ECB must raise interest rates next month even if the conflict is resolved quickly.

Oil prices had rallied in March and April but are on pace for a decline in May.

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