Will Trump’s Evacuation Call for Tehran Send Oil Prices Higher?
Oil prices rose after U.S. President Donald Trump called for the evacuation of Tehran, before paring gains, as markets remained wary of an escalation in the conflict with Israel that could disrupt crude supplies.
Brent rose as much as 2.2% before easing to trade above $73 a barrel, while West Texas Intermediate neared $72, after futures closed lower on Monday on signs Iran was trying to ease tensions. However, Israel has pressed ahead with its strikes, which began on Friday targeting nuclear sites.
The market remains focused on the Strait of Hormuz and signs that Tehran may be trying to disrupt the flow of crude through the waterway, through which about a fifth of the world’s daily production passes. Maritime security firm Ambrey warned of an incident near the area on Tuesday, though details were still unclear.
“The market is nervous but has not priced in the worst-case scenario for supply disruptions,” said Vandana Hari, founder of Vanda Insights in Singapore. “There could be a bigger attack, but it still doesn’t change the market’s calculation of supply risk.”
The impact has been largely confined to shipping. Navigation signals in the Strait of Hormuz and the Persian Gulf have been increasingly disrupted, affecting position reporting, according to the Royal Navy, and some shipowners have been reluctant to accept orders in the region, citing safety concerns. So far, Iran’s crude export infrastructure has not been affected.
Oil prices remain well above where they were before the attacks, prompting record volumes of producer hedging and futures and options moves. Morgan Stanley has raised its price forecasts, citing the heightened risk of a conflict.
The White House is in discussions with Iran about a possible meeting this week that would involve the nuclear deal and talks to end the war with Israel, Axios reported, citing four unnamed sources.
Trump abruptly left a summit of Group of Seven leaders in Canada, hours after he called for his evacuation. White House Press Secretary Karoline Leavitt said the president was leaving for Washington “so he can take care of a lot of important things,” and in a follow-up post on X said the departure was because of “what’s happening in the Middle East.”
Israel says it has captured most of Iran’s airspace and severely damaged key facilities used in its missile and nuclear programs since the strikes on Friday, raising concerns of a wider conflict in a region that produces about a third of the world’s crude.
“Oil and shipping present first-order tail risks,” Vishnu Varathan, head of macro for Asia excluding Japan for Mizuho Bank Ltd., said in a note. “A doubling of oil prices in an effective blockade of Hormuz is not unusual.”
Source: Bloomberg
