Oil prices rose more than 4% this Wednesday (18), with traders pricing in possible supply disruptions amid concerns about the conflict between the United States and Iran, and after negotiations between Ukraine and Russia in Geneva ended without a breakthrough.
Brent crude futures were up $2.81, or 4.17%, at $70.23 a barrel by 3:10 p.m. EDT, while U.S. West Texas Intermediate (WTI) crude futures were up $2.78, or 4.46%, at $65.11. Both contracts fell to two-week lows on Tuesday (17).
“The big moves in oil prices today are being driven solely by geopolitics as they continue to react to headlines about meetings between the US and Iran, and Russia and Ukraine,” highlighted Andrew Lipow, president of Lipow Oil Associates.
“The oil market is pricing in the additional risk of a supply disruption,” he added.
Oil’s drop on Tuesday followed hopes that tensions between the US and Iran were easing after Iran’s foreign minister said the countries had reached an understanding on nuclear talks.
But this Wednesday (18), the semi-official Iranian news agency Fars reported that Iran and Russia will hold naval exercises in the Sea of Oman and the northern Indian Ocean on Thursday (19).
As talks began on Tuesday, Iranian state media said Iran was temporarily closing parts of the Strait of Hormuz, a vital global oil supply route, due to security precautions while the elite Revolutionary Guard conducted military exercises there. State media later reported that the strait had been closed for a few hours, without making it clear whether it had been fully reopened.
“Iran knows Trump’s negotiating tactics now. It also knows that a disruption in oil exports from the Strait of Hormuz and a rise in oil prices to $150 per barrel is the last thing Trump wants,” SEB chief commodities analyst Bjarne Schieldrop pointed out in a note.
“Iran has time to negotiate calmly,” he continued.
Political consultancy Eurasia Group said in a note to clients on Tuesday (17) that it believes there is a 65% probability of US military strikes against Iran by the end of April.
“Everyone is monitoring the amount of military equipment that is flooding into the region from the US, which indicates that hostilities are imminent,” said John Kilduff, partner at Again Capital.
