Iran Peace on the Brink, Oil Rallies Sharply
Oil prices closed nearly three percent higher on Monday (May 11) after US President Donald Trump declared that the ceasefire with Iran was "on life support." This statement reinforced concerns that the conflict was far from over and the Strait of Hormuz remained closed with no certainty about when it would reopen.
Brent crude closed up 2.88% at US$104.21 per barrel, while West Texas Intermediate (WTI) gained 2.78% to US$98.07 per barrel. During the session, Brent briefly reached a peak of US$105.99 and WTI reached US$100.37 before stabilizing.
This rise reversed last week's decline, when both oil benchmarks recorded weekly declines of around six percent amid hopes of a peace deal that would allow normal oil flows through the Strait of Hormuz.
However, sentiment quickly changed after Trump rejected Iran's latest response to the US peace proposal, calling it "stupid" and "totally unacceptable." In its response, Iran demanded an end to the fighting on all fronts, including Lebanon, as well as compensation for war damage, the lifting of sanctions, an end to the US naval blockade, and a guarantee that there would be no further attacks.
These tensions have kept the Strait of Hormuz, a vital waterway that has been the lifeline of global oil shipments, closed. The CEO of Saudi Aramco said the world has lost about one billion barrels of supply in the past two months, and the energy market is expected to take a long time to stabilize even if oil flows are reopened.
Reuters data also shows that OPEC production fell to its lowest level in more than two decades in April, due to export disruptions triggered by the conflict. Meanwhile, Saudi Arabia's oil exports to China are expected to decline again in June due to high prices and tighter supplies.
On the geopolitical front, Trump is scheduled to arrive in Beijing midweek to meet Chinese President Xi Jinping, with Iran a key topic of discussion.
JPMorgan analysts expect oil prices to remain around the low $100s for the remainder of the year, with market normalization unlikely to occur quickly even if the Strait of Hormuz is reopened.
The market is currently shifting between two major risks: uncertain diplomatic expectations and the potential for conflict escalation, which could again destabilize global energy supplies. (Arl)
Source: Newsmaker.id
