(Bloomberg) — Oil gained after efforts to resume peace talks over the Iran war stalled, with the vital Strait of Hormuz remaining effectively closed, extending disruptions in the Middle East that have roiled global markets.
Brent rose as much as 2.5% to $107.97 a barrel, while West Texas Intermediate traded near $96. US President Donald Trump canceled a planned trip over the weekend by his top envoys to Pakistan, which is mediating talks, while Iran said it won’t negotiate so long as it’s being threatened.
A ceasefire has mostly held in place since early April, but a blockade of the Strait of Hormuz by both the US and Iran has made the key energy chokepoint virtually impassable. The supply shock has choked off supplies of crude, fuel, natural gas and even fertilizers, raising concerns about an inflation crisis.
“The Strait is still very much under siege, with traffic halted,” said Mona Yacoubian, director of the Middle East Program at the Center for Strategic and International Studies. “It seems like neither side wants to go back to outright conflict. We’re in this purgatory, where it’s just stalemated.”
Trump on Saturday told his envoys Jared Kushner and Steve Witkoff to skip the trip to Pakistan, and later told reporters that Iran “offered a lot, but not enough.” Iranian President Masoud Pezeshkian said his nation won’t enter “imposed negotiations under threats or blockade.”
The Iran war, now in its ninth week, has driven up energy prices and led to shortages of key products such as liquefied petroleum gas in India, and prompted airlines to cut flights. The International Energy Agency says the conflict is causing the biggest supply shock in history.
“Consolidation above $100 is the area that we’re heading,” said Robert Yawger, director of energy futures at Mizuho Securities. “As every day ticks forward, there’s less and less chance that we’ll see a deal anytime soon.”
The longer Hormuz is closed, the more consumption is going to have to recalibrate lower to align with supply that’s dropped at least 10%, according to traders. A loss of 1 billion barrels is already all but guaranteed — more than double the emergency inventories that governments released after the conflict with demand destruction likely to spread.
US forces intercepted a sanctioned vessel in the Arabian Sea on Saturday as part of the blockade, according to US Central Command. The US deployed a Navy helicopter to intercept the vessel, which subsequently complied with military directions to turn back to Iran under escort. A total of 37 ships have been redirected since the start of the blockade, Centcom said.
Most of Iran’s crude is exported to China, with the country’s private refiners — known as teapots — taking advantage of the cheaper barrels. On Friday, the US sanctioned Hengli Petrochemical (Dalian) Refinery Co. over its links to Tehran, just weeks ahead of an expected summit between Trump and Chinese President Xi Jinping. Hengli has denied any trade with Iran.
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