Oil Jumps Over $6 On Iran Report Of Halted U.S.-Tehran Exchanges, Hormuz Blockade Risk
NEW YORK, June 1 (Reuters) – Oil prices rose more than $6 a barrel on Monday after Iran’s Tasnim news agency reported that Tehran’s negotiating team had stopped exchanging messages with the United States and its ally the “Resistance Front” was considering measures to completely close the Strait of Hormuz and block other waterways, including the Bab al-Mandeb Strait.
The report comes after Iran and the United States exchanged attacks and Israel ordered troops to advance towards Lebanon in its fight against the Tehran-backed Hezbollah militant group.
Brent futures rose $6.02, or 6.6%, to $97.14 a barrel at 10:02 a.m. ET, while U.S. crude futures rose $6.68, or 7.7%, to $94.04 a barrel.
In May, Brent and WTI lost around 19% and 17% respectively. This was the largest monthly decline in absolute terms for both contracts since March 2020, when the Covid-19 pandemic reduced energy demand.
Global stocks remained steady near record levels on Monday as the AI boom continued to fuel demand. Oil is often traded alongside other risk assets such as stocks.
Clashes in the Middle East after Washington hosted Israel-Lebanon peace talks on Friday have dampened hopes that the United States and Iran could soon announce an extension of the ceasefire.
US President Donald Trump said on Friday that he would soon decide on a proposed agreement to extend the ceasefire declared in early April.
Israel would be key to such a deal, and Iran has repeatedly said Hezbollah and Lebanon should be included in the agreement. The United States has proposed a plan to “gradually de-escalate tensions,” a U.S. official said Sunday.
Concerns are growing about mines in the Strait of Hormuz, a key oil and gas shipping lane, IG analyst Tony Sycamore said in a note.
“Even if an agreement is reached, it will not provide a flow of supply,” Sycamore said.
An Axios report aired on channel X on Friday said Iran had deposited more mines in the strait last week.
Iranian Foreign Ministry spokesman Esmaeil Baghaei said on Monday that the delay in the diplomatic process to end the war can be explained by a lack of trust, Washington’s contradictory positions and Israel’s attacks on Lebanon.
Supply concerns outweighed weekend economic data from China that showed factory activity stalled. This situation increased concerns that the world’s second largest economy was losing momentum.
Saudi Arabia is likely to cut official selling prices (OSP) of crude oil to Asia in July for a second month, according to a Reuters poll.
The Russian government plans to increase fuel supplies from Belarus and tighten control over gasoline and diesel exports to meet domestic fuel demand, RBC news outlet reported Monday, citing two sources familiar with the matter.
The report stated that a complete ban on gasoline exports for two months was discussed, including some intergovernmental agreements.
Kazakhstan has again increased oil production to 290,000 metric tons per day after previous production losses at the country’s largest oil field, Tengiz, Energy Minister Erlan Akkenzhenov said on Monday.
Goldman Sachs said on Sunday that weak oil demand in China and Europe poses a major downside risk to its fourth-quarter Brent crude forecast of $90 a barrel and its WTI forecast of $83 a barrel, but supply disruptions in the Middle East could still push prices higher.
(Reporting by Siddharth Cavale and Shadia Nasralla, additional reporting by Colleen Howe and Sam Li; Editing by Jamie Freed, Emelia Sithole-Matarise, Susan Fenton and Nick Zieminski)
