Brent crude rises 2% as U.S. military strikes against Iran cloud Middle East peace prospects

Brent crude rises 2% as U.S. military strikes against Iran cloud Middle East peace prospects

On Tuesday, Brent crude oil experienced a notable increase as U.S. military operations in southern Iran, coupled with President Donald Trump's ambiguous statements regarding negotiations with Tehran, unsettled traders.

In the Asian trading session, July futures for the international benchmark Brent crude rose by 2%, reaching $98.26 per barrel. In contrast, U.S. West Texas Intermediate (WTI) futures for July were trading 5.1% lower at $91.73 per barrel compared to Friday's closure. It is worth noting that there was no WTI price settlement on Monday due to the observance of the U.S. Memorial Day holiday.

U.S. Military Operations

The U.S. military reported that it executed "self-defense strikes in southern Iran" targeting vessels suspected of attempting to deploy mines, along with missile launch sites. The U.S. Central Command stated that these actions were aimed at "protecting our troops from threats posed by Iranian forces."

Trump's Mixed Messaging

President Trump's comments on social media further complicated the peace negotiations. He mentioned that he had urged Saudi Arabia, Qatar, Pakistan, Turkey, Egypt, and Jordan to participate in the Abraham Accords, which seek to normalize relations between Arab nations and Israel.

Moreover, Trump asserted that negotiations with Iran were "proceeding nicely," yet he warned that the U.S. could resort to military action if the discussions were to falter. He remarked, "It will only be a Great Deal for all or, no Deal at all."

Global Oil Market Strain

According to the Swiss multinational investment bank UBS, the global oil market is displaying increasing signs of strain as inventories continue to decline amid persistent disruptions to shipments via the Strait of Hormuz. In March and April, global oil inventories reportedly fell by a total of 246 million barrels, while cumulative production losses could surpass 1 billion barrels by the end of May, as indicated by the bank.

The significant drawdowns in inventory highlight that the market remains "strongly undersupplied," as UBS noted, emphasizing the decreasing amounts of crude and refined product inventories on land, despite a rise in oil stored on tankers due to rerouted U.S. exports directed towards Asia.