NEW YORK: Oil steadied as traders tracked a report of a push for a ceasefire in the Middle East, after President Donald Trump announced a fresh ultimatum on Iran if the Strait of Hormuz was not reopened.
Brent traded below US$110 a barrel, shedding most of an early gain, while West Texas Intermediate was near US$112.
The United States, Iran and regional mediators were discussing terms of a potential 45-day pause that could lead to a permanent end to the war, Axios reported, citing sources with knowledge of the talks.
Still, chances of reaching a partial deal over the next 48 hours were low, it said.
The crude market has been pitched into turmoil by the war, which triggered an unprecedented supply shock that’s morphing into a global energy crisis.
Oil and product prices have soared, stoking inflationary pressures, undermining economic growth, and piling pressure onto businesses and consumers.
At the weekend – before the Axios report – Trump threatened in a series of social-media posts to bring “Hell” to Iran with strikes on power plants and other infrastructure if Hormuz was not reopened.
Tehran rejected the demands, and the route remains closed to all but a small number of vessels. Investors have been rattled by Trump’s frequently contradictory messaging on the conflict, with the US leader oscillating between occasional claims that the war would soon be over and threats to step up attacks, including against civilian infrastructure.
At the same time, he has a history of setting self-imposed deadlines that he subsequently doesn’t keep.
Trump said he planned to hold a news conference at 1pm yesterday and also posted about an 8pm Eastern Time deadline today, without offering any details about what he meant.
On March 26, Trump gave Iran a 10-day deadline to reopen Hormuz, which would have expired yesterday evening.
“On the face of it, the war has entered another sharp escalatory phase, which is bullish,” said Vandana Hari, founder of Vanda Insights.
Still, “the expectation of a massive and quick price correction in the event of a resolution creates a hesitancy to add too much length at this stage”, she said.
The Organisation of the Petroleum Exporting Countries and its allies also warned after a weekend meeting that damage to energy assets would have a prolonged impact on oil supply even after hostilities ended.
Members of the producers’ group approved an increase in output quotas – a signal of intent, given flows from the Persian Gulf remain throttled.
With the war grinding on, there are signs of acute concern about near-term supply.
Brent’s prompt spread – the difference between its two nearest contracts – ballooned above US$10 a barrel in backwardation, a bullish pattern. That’s the widest since the conflict began, and exceeds peaks in 2022 after Russia invaded Ukraine.
Ahead of the Easter weekend, there were also signs of physical-market tightness. Dated Brent – the world’s most important price for real-world barrels – surged above US$140 to the highest since 2008.
Control of Hormuz – which connects the Persian Gulf to wider markets, especially across Asia – remains central to the conflict.
Tehran has imposed its authority over the waterway, permitting just a small number of vessels to pass through, including in recent days a French container ship and Japanese-owned tanker, as well as vessels from Malaysia and Pakistan.
Iran announced on Saturday that Iraq would be exempt from its curbs in the strait, potentially allowing a pick-up in oil cargoes.
Still, an Iraqi official struck a cautious note, saying the outflow would depend on whether shipping companies are willing to risk entering the trade artery.
The Foreign Ministry in Oman – which sits across the strait from Iran – said in a post on X on Sunday it discussed with Iran options to ensure “smooth flow” through the waterway. Both sides presented proposals for study, it said. — Bloomberg
