(Investing) – Oil prices climbed on Tuesday, with both crude benchmarks topping $100 a barrel. The advance came amid an impasse between the U.S. and Iran, denting hopes for a swift end to the war.
A key U.S. inflation report also showed an outsized impact of surging oil prices due to the Middle East conflict.
At 15:50 ET (19:50 GMT), Brent crude futures expiring in July, the global oil benchmark, rose 3.4% to $107.72 a barrel, while U.S. West Texas Intermediate crude futures expiring in June advanced 4.3% to $102.29 a barrel.
Diplomatic setback
Market sentiment remained dominated by fears that the more than two-month old war in the Middle East could further tighten global supply, particularly after Trump rejected Tehran’s latest response to an American peace proposal, calling it “totally unacceptable.” He described Tehran’s reply as “a piece of garbage,” adding that an ongoing ceasefire between the warring parties was now at its weakest point.
Iran defended its position on Monday, saying its counteroffer was focused on ending the war, lifting an ongoing U.S. naval blockade, and restoring shipping traffic through the Strait of Hormuz. Tehran has also demanded compensation for war damage, removal of sanctions, and recognition of its sovereignty over the strait.
A CNN report late Monday said Trump is seriously considering resuming major combat operations against Iran as peace negotiations dithered. The comments renewed concerns over the future of shipping through the Strait of Hormuz, a vital chokepoint through which roughly one-fifth of global oil and fuel supply passes.
Saudi Aramco Chief Executive Amin Nasser warned this week that even if the waterway reopened immediately, it could still take months for global oil flows to normalize. Oil retreated temporarily last week on expectations that Washington and Tehran may be moving closer to a diplomatic breakthrough, but those hopes have since largely faded.
The United Kingdom on Tuesday said it would be contributing drones, jets, and a warship as part of any future defensive mission to secure safe shipping through the strait.
‘Gusher of oil like you’ve never had before’
“We don’t have to rush anything,” Trump said on Iran on Tuesday. “We have a blockade which allows them no money. It’s a very simple thing: we cannot let them have a nuclear weapon — because they’d use it,” the president told radio talk show host Sid Rosenberg.
Later, before boarding his flight to a three-day trip to China, Trump told reporters that the U.S. would “only” be “making a good deal.” When asked what would be his redline to end the ceasefire, the president said “we’re going to see.”
“One way or the other, it’s going to work out very well. It’s going to work out very well. I think you’re going to have so much oil, you’re going to have a gusher of oil like you’ve never had before. So when oil goes up a little bit, I thought it would go up much more,” Trump said.
“If you go back three, four months ago, we were contemplating, we assumed oil would go much higher. Yesterday, it was at $99. And if you think about it, I would have taken that all day long, because it’s very simple: Iran cannot have a nuclear weapon. They will not have a nuclear weapon,” he added.
The president also said he would be discussing Iran with Chinese President Xi Jinping on his trip, adding that the Asian nation had “been relatively good” about the war.
“You look at the blockade, no problems. They get a lot of their oil from that area, we’ve had no problem. And he’s been a friend of mine. He’s been somebody that we get along with… this is going to be a very exciting trip. A lot of good things are going to happen,” Trump said.
China is Iran’s largest oil buyer and retains significant diplomatic leverage with Tehran.
