Oil Rises as Traders Weigh Risk of US-Iran Conflict After Talks
Oil gained as traders weighed whether talks between the US and Iran will be enough to avert conflict, following a report that American military intervention could come sooner than expected.
West Texas Intermediate rose as much as 3.6% to trade above $64 a barrel after Axios reported that any US military operation would likely be a weeks-long campaign, rather than the pinpoint operation that took place in Venezuela last month. Israel’s government is pushing for a scenario targeting regime change, the report added.
A potential conflagration would put crude flows at risk in the Strait of Hormuz – the choke point for energy exports from the world’s top oil-producing region that Iran said on Tuesday it would briefly close for military drills. US President Donald Trump risks angering voters ahead of mid-term elections this year if a spike in crude prices makes gasoline more expensive at the pump.
“I’m a cynic and still don’t believe Trump would risk higher pump prices at home in an election year where affordability is high on the agenda,” said Ole Sloth Hansen, head of commodities strategy at Saxo Bank, adding the Axios report was driving up prices on Wednesday.
Talks so far have been inconclusive, with Tehran saying it reached a “general agreement” with Washington on the terms of a potential nuclear deal. A US official said Iranian negotiators would return to Geneva with a new proposal in two weeks.
Meanwhile, a second day of US-brokered meetings in Geneva between Russia and Ukraine broke up after barely 90 minutes as Ukrainian President Volodymyr Zelenskiy accused Moscow of attempting to prolong the process. The head of Russia’s delegation said talks were difficult and businesslike, adding the next meeting will take place soon.
Crude has benefited so far this year from strong cross-commodity momentum, as well as geopolitical concerns that have outweighed warnings that a global glut in the market will drag down prices. The standoff with Iran — which was rocked by anti-government protests in January — has fanned concerns among traders that oil output or vital supply routes could be interrupted by military clashes.
WTI for March delivery rose 3.13% at $64.28 a barrel by 10:11 a.m. in New York.
Brent for April settlement rose 3.0% to $69.42 a barrel.
Source : Bloomberg.com
