(Investing) – NEW YORK – Oil prices surged more than $6 per barrel on Monday after Iran’s Tasnim news agency reported that Tehran’s negotiating team has halted message exchanges with the United States and its allied “Resistance Front” are considering measures to completely block the Strait of Hormuz and choking other waterways including the Bab el-Mandeb Strait.
The report comes after Iran and the U.S. traded strikes and Israel ordered troops to move further into Lebanon in its battle with the Tehran-backed Hezbollah militant group.
Brent futures rose $6.02 or 6.6% at $97.14 a barrel at 1002 a.m. ET (1402 GMT) while U.S. crude futures rose $6.68 or 7.7% to $94.04 a barrel.
Over May, Brent and WTI lost around 19% and 17%, respectively. It was both contracts’ biggest monthly fall in absolute terms since March 2020 when the COVID-19 pandemic slashed energy demand.
Global equities held steady near record highs on Monday as the AI boom continued to drive demand. [MKTS/GLOB] Oil often trades in tandem with other risk assets such as equities.
The fighting in the Middle East, after Washington hosted Israel-Lebanon peace talks on Friday, dimmed hopes that the U.S. and Iran could soon announce an extension to their ceasefire.
U.S. President Donald Trump said on Friday he would soon decide on a proposed deal to extend a ceasefire announced in early April.
Israel would be key to any such deal, and Iran has said repeatedly that Hezbollah and Lebanon must be included. The U.S. has proposed a “gradual de-escalation” plan, a U.S. official said on Sunday.
Concerns are rising about mines in the Strait of Hormuz, a key oil and gas shipping lane, IG analyst Tony Sycamore said in a note. “Even if an agreement is reached, it won’t deliver a flood of supply,” Sycamore said.
An Axios report said on X on Friday that Iran had dropped more mines in the strait last week.
Iran’s Foreign Ministry spokesperson Esmaeil Baghaei said on Monday the delay in the diplomatic process to end the war can be explained by a lack of trust, Washington’s contradictory positions and Israel’s attacks on Lebanon.
Concerns over supply outweighed weekend economic data from China which showed stalling factory activity. This added to concerns the world’s second-largest economy is losing momentum.
Saudi Arabia is likely to cut its official selling prices (OSPs) for crude oil to Asia in July for a second month, a Reuters survey showed.
The Russian government intends to increase fuel supplies from Belarus and tighten oversight over exports of gasoline and diesel to meet domestic fuel demand, the RBC news outlet reported on Monday, citing two sources familiar with the matter. A complete ban on gasoline exports for two months, including under some inter-governmental agreements, is under discussion, the report said.
Kazakhstan has restored its oil production to 290,000 metric tons per day following earlier production losses at the country’s largest oilfield, Tengiz, Energy Minister Erlan Akkenzhenov said on Monday.
Goldman Sachs said on Sunday that weak oil demand in China and Europe poses a major downside risk to its fourth-quarter Brent crude forecast of $90 a barrel and WTI forecast of $83, although Middle East supply disruptions could still push prices higher.
