Oil prices moved lower after reports that U.S. and Iranian negotiators reached an agreement to extend a ceasefire, easing some of the immediate fear that has driven the market higher. But the latest strikes and counterclaims around Iran quickly brought back concern about the Strait of Hormuz, the narrow waterway that handles a major share of global oil shipping.
Brent crude futures rose 35 cents to $94.64 per barrel at 10:23 a.m. ET, while West Texas Intermediate gained 58 cents to $89.26 per barrel. Prices had already jumped earlier after Iran’s Revolutionary Guard said it targeted a U.S. air base, following fresh U.S. strikes in Iran against a military site believed to threaten U.S. troops and commercial shipping through the Strait of Hormuz.
Fear over shipping routes returns
The Strait of Hormuz remains the key pressure point for energy markets because any disruption there can quickly affect global supply. A U.S. official told MS NOW that the American strikes were aimed at a site seen as a threat to both U.S. forces and shipping lanes through the strait.
Iran’s state television said Tehran had agreed in a draft memorandum of understanding with the U.S. to reopen Hormuz to prewar levels of commercial traffic. It also said Iran and Oman would manage traffic through the strait under that draft, but the White House rejected the report and called it a “complete fabrication.”
President Donald Trump later said no nation would control shipping through the strait. That message did little to remove the market’s caution, because traders remain focused on whether the standoff could interrupt crude flows.
Markets weigh diplomacy against escalation
Axios reported that negotiators reached a 60-day memorandum of understanding to extend the ceasefire and begin talks over Iran’s nuclear program. Trump still needs to approve the deal, according to the report, which helped oil prices give back earlier gains.
Secretary of State Marco Rubio said the talks have made some progress and that Trump prefers diplomacy. Rubio said the president would give negotiations with Iran “every chance to succeed,” reinforcing the idea that a deal is still possible even as tensions remain high.
Oil has also fallen more than 10% since May 18, when Trump said he had called off an imminent wave of military strikes against Iran to allow more time for negotiations. That drop shows how quickly the market has moved between fears of conflict and hopes of a diplomatic opening.
Why traders still watch Hormuz closely
Amos Hochstein, a former senior energy adviser to President Joe Biden, said leaders in the Middle East already believe Iran has effectively taken control of Hormuz. He told CNBC’s “Squawk Box” that “no matter what happens, the Iranians will control the Strait of Hormuz for the foreseeable future,” adding that the view is widely shared across the region.
Citigroup said in a note late Wednesday that oil markets were finding firmer footing as investors priced out the worst-case supply disruption scenarios. Still, the bank warned that uncertainty over the timing of any deal was keeping central banks alert because higher energy costs can feed broader inflation pressures.
That view matters beyond oil traders, because prolonged gains in crude can spill into what Citi called “second round effects” on prices across the economy. For now, the market remains caught between ceasefire hopes and the risk that any new clash near Hormuz could quickly tighten global supply again.
Read more at: www.cnbc.com