Brent crude jumps 4%, as US strikes in Iran set back hopes for Hormuz re-opening

By Scott DiSavino

NEW YORK, May 26 (Reuters) – Brent crude oil futures rose nearly 4% on Tuesday after the U.S. military launched an attack on Iran; This dashed hopes that the United States and Iran would reach an agreement over the weekend to end the three-month war that would reopen shipping through the critical Strait of Hormuz.

However, US futures fell on Monday, when US markets were closed, catching up with the selling wave in Brent.

Global benchmark Brent settled at $99.58 per barrel, up $3.44, or 3.6%, while U.S. West Texas Intermediate (WTI) crude fell $2.71, or 2.8%, to settle at $93.89.

Brent closed at its lowest level since April 20 on Monday, losing 7 percent on renewed hopes of a deal between the United States and Iran. US crude oil fell on Monday as the market was closed for the US Memorial Day holiday.

WTI closed at its lowest level since April 22 on Tuesday, while US gasoline futures fell 7% and US diesel futures fell 4% to their lowest closes in five weeks.

U.S. officials have said on various occasions that they are close to a deal with Iran to end the conflict, but have been unable to reach an agreement beyond a temporary ceasefire that would minimize attacks.

Iran on Tuesday said the United States had violated a ceasefire after launching defensive strikes in southern Iran, while U.S. Secretary of State Marco Rubio said negotiating a deal to stop the conflict “could take several days.”

Iran’s foreign ministry said the US strikes in Iran’s southern Hormozgan province, where Iranian media reported the sounds of explosions early Tuesday, were a “grave violation” of the tenuous ceasefire that has been in place for nearly seven weeks.

Both sides have previously said progress is being made on a memorandum of understanding that could stop the war and restart shipping through the blockaded Strait of Hormuz, giving negotiators 60 days to discuss more complex issues, including Iran’s nuclear program.

“We are still waiting for more details on a potential deal,” said Giovanni Staunovo of UBS. “Meanwhile, we are seeing renewed tensions in the Middle East while passages through the Bosphorus remain restricted.”

The US attack came as Iran’s chief negotiator and foreign minister were in Doha to meet with the Qatari prime minister in a bid to reach a deal.

TANKERS MONITORED PASSING THROUGH THE straits

Iran has effectively halted almost all non-Iranian ships entering and exiting the Strait of Hormuz since the war began in late February, blocking nearly a fifth of global oil and liquefied natural gas (LNG) flows.

But ship tracking data showed that three LNG tankers bound for Pakistan, China and India have passed through the Bosphorus in recent days, as well as a supertanker carrying Iraqi crude to China, which has been stranded for nearly three months.

But UK Merchant Marine Operations said on Tuesday that a tanker had reported an external explosion on the ship’s port side, close to the waterline, 60 nautical miles off Oman’s capital Muscat.

Pakistan plans to increase domestic storage for crude oil and refined products to improve energy security, according to a government document shared with oil producers and some of the world’s leading trading firms.

Consumer confidence in the United States fell in May as war-related inflation concerns intensified and households’ views on the labor market remained pessimistic.

Inflation increases the cost of goods for consumers, and the rise in prices causes central banks such as the US Federal Reserve to worry that they will have to tighten monetary policy; This would likely increase consumer borrowing costs and reduce economic growth.

(Reporting by Scott DiSavino in New York and Alex Lawler and Robert Harvey in London; Additional reporting by Pooja Menon and Emily Chow in Singapore; Editing by David Holmes and Emelia Sithole-Matarise)