Negotiations Stall, Oil Rises Again
Oil prices rose for a third consecutive day as the market grew pessimistic about the chances of the US and Iran reaching a peace deal soon, while tensions escalated in the Persian Gulf. WTI approached US$95/barrel after gaining more than 7% in the previous two sessions, while Brent closed at US$96/barrel on Tuesday.
The rise was driven by two factors: stalled negotiations and escalation in the region. Israel is said to be continuing its attacks in Lebanon, which is seen as disrupting the long-running Washington-Tehran negotiations. A new round of Israel-Lebanon talks is scheduled for Wednesday, while Trump remains optimistic that an interim agreement with Iran can be reached soon, refuting Iranian media's narrative that the talks were stalled due to the Lebanon conflict.
The Strait of Hormuz remains at the heart of the uncertainty. The market is struggling to assess whether the ceasefire will be extended and whether export flows from the Gulf will return to normal. The delay in a resolution has shifted concerns to the supply side: if exports fail to fully recover, the world could potentially have to continue eroding global oil supplies for longer to cover the shortfall.
Some analysts predict that the supply squeeze could last longer. TD Securities estimates that Middle East production may not return to pre-war levels until October–November at the earliest, with global inventories projected to be significantly depleted during that period. In this scenario, Brent is expected to average higher in the second half of the year, with the risk of a spike if regional shortages occur.
On the ground, tensions are also said to be escalating: Iran launched ballistic missiles toward Kuwait and Bahrain (which were reportedly destroyed in mid-air or intercepted), while the US military reported an attack on Qeshm Island. High volatility has caused market participants to reduce positions: Brent open interest reportedly fell to its lowest level since August, indicating that many are choosing to sit on the sidelines because prices are too easily swayed by headlines.
5 key points:
- Oil rises for a third day; WTI approaches US$95 and Brent holds at US$96.
- The prospect of a US–Iran deal is seen as stalled; the Lebanon conflict is also disrupting diplomatic progress.
- Uncertainty over the extension of the ceasefire and the future of the Hormuz flow are determining prices.
- Concerns shift to supply: global inventories risk further depletion if Gulf exports fail to recover.
- High volatility forces traders to reduce exposure; Brent open interest falls to its lowest since August. (asd)*
