(Bloomberg) — Oil extended gains after an Iranian news agency reported that the Islamic Republic struck “hostile targets” in the Strait of Hormuz.
The US and global benchmark futures contracts climbed more than 1% in post-settlement trading Thursday. Those moves followed the first gain in three days for West Texas Intermediate as signs mounted that a potential Iran-Oman deal won’t lead to a full-fledged resumption of oil shipments through the strait.
The contracts earlier surged to intraday highs after Iranian media reports that Tehran will seek to bar US and Israeli vessels from the waterway and require compensation from hostile countries before they’re allowed to use it. Traders interpreted the report to mean Persian Gulf exports will remain restricted in the near term.
European natural gas futures rocketed as much as 12% on the Fars news agency report of strikes as traders priced in increased risks to natural gas tankers.
Even before the latest developments, the outlook for an agreement had been growing murkier. Iran said a pact on proposed shipping lanes was in the final stages. But the country has insisted that the US isn’t part of the agreement with Oman and hinted a normalization of the strait will depend on the lifting of an American blockade on Iranian ports.
“Crude traders remain focused” on the status of a potential pact, said Dennis Kissler, senior vice president for trading at BOK Financial Securities Inc. “The longer the delays, the more prices will fade back to the upside.”
The White House didn’t respond to a request for comment on the announcement of a pending deal. US President Donald Trump said at a rally in Las Vegas on Wednesday evening that the US is talking to Tehran and he will “see what happens” in negotiations.
Even so, prices are holding most of this week’s slump after Iran and the US indicated a resolution was close for shipping through the crucial energy chokepoint. A return to normalized flows through Hormuz would unlock millions of barrels of oil shipments disrupted by the now five-month-old conflict.
Other risks also emerged, reinforcing traders’ reluctance to fully unwind long positions for fear of being wrong-footed by a sudden escalation. In a sign of persistent threats to shipping in the Middle East, the UK Navy reported on Thursday a tanker hearing two explosions while transiting the strait.
Earlier, Iran-backed Houthi militants in Yemen said they targeted a Saudi oil tanker in the Gulf of Aden.
Elsewhere, oil loadings at the key Caspian Pipeline Consortium terminal on the Black Sea resumed after being halted by the risk of drone attacks nearby.
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–With assistance from Nicholas Lua, Kanoko Matsuyama and Paul Burkhardt.
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