Oil Prices Steady Amid Uncertain Iran Tensions
Oil prices rose after President Donald Trump stated that the war with Iran could end within weeks. Brent crude rose above $105 per barrel after a 3.2% drop on Tuesday, while West Texas Intermediate (WTI) neared $103. Trump told reporters that the United States could leave Iran within two to three weeks, and indicated that a deal with Tehran was possible, though it was not a prerequisite for ending the war. However, Trump has frequently shifted his stance, saying a deal with Iran was imminent or even threatening to escalate military operations. The US president is scheduled to address the nation on Wednesday evening local time to provide an update on the situation in Iran.
Although Trump stated that the war could end within a specified timeframe, restoring oil supplies in the vital Strait of Hormuz will take time. Several energy facilities have also been damaged by the conflict. Meanwhile, a third US aircraft carrier strike group is also heading to the Middle East, and markets remain wary of the possibility of a deadly ground invasion by US forces into Iran. "The market seems too relaxed about assuming that things will return to normal quickly, and I think that's a risk factor for the market," said Dominic Schnider, head of commodities at UBS Group AG. He added that oil prices have not risen much higher despite the significant supply shock.
The near-total closure of the Strait of Hormuz has cut off oil and gas supplies to global markets, leading to a spike in energy prices and fueling fears of an inflation crisis. Retail gasoline prices in the US have even surpassed $4 per gallon for the first time since August 2022, which is likely to increase pressure on President Trump. However, US officials have not explicitly stated who they are negotiating with in Iran. Iranian Foreign Minister Abbas Araghchi said he had received a message from the US Middle East envoy, but no formal negotiations were underway. Iran has also set several conditions that must be met, including maintaining sovereignty over the Strait of Hormuz.
Trump said that key military objectives have been achieved, and that the US will leave the region once Iran cannot obtain nuclear weapons. He claimed that the current regime in Iran is better than the previous administration. In a social media post on Tuesday, Trump also called on his allies to seize control of Hormuz. A report from The Wall Street Journal stated that the United Arab Emirates (UAE) has urged the US, along with military powers from Europe and Asia, to form a coalition to open the Strait of Hormuz by force. The newspaper cited a UAE official.
Although the situation has begun to ease, some market experts predict that oil prices will likely remain high. "Even though de-escalation is starting to occur, shipping costs, insurance, and tanker movements will take time to return to normal," said Priyanka Sachdeva, a senior analyst at Phillip Nova Pte. China and Pakistan also issued a joint call on Tuesday for an immediate end to the fighting and protection of shipping through Hormuz. The call was part of a five-point joint proposal to restore peace and stability in the Gulf and the Middle East following a meeting of the two countries' foreign ministers. Although shipping through Hormuz has begun to increase, trade volumes remained lower than usual during the Asian session, with uncertainty surrounding shipping if the US halts its military operations.
Going forward, the oil market will continue to be affected by tensions in the Middle East, particularly surrounding the situation in the Strait of Hormuz. Despite hopes for de-escalation, political uncertainty and potential oil supply disruptions will continue to impact energy prices in the short term. If US military operations are reduced, volatile price movements and increased logistics and shipping costs will likely prolong oil price pressures. The oil market must remain vigilant for further developments, and the long-term outlook will likely remain influenced by how global political dynamics, particularly in the Middle East, continue to evolve. (asd)
Source: Newsmaker.id
