Oil prices climbed at the start of the week, with Brent crude rising as much as 2.2% to $82.30 a barrel and West Texas Intermediate nearing $77. This surge followed renewed tensions surrounding US-Iran peace talks in Switzerland. US President Donald Trump issued new threats of strikes if Hezbollah continued attacks on Israel, while Iran announced it had again closed the Strait of Hormuz, a critical transit point for global energy supplies.
The talks, held in Buergenstock, Switzerland, involved US Vice President JD Vance and Iranian officials, mediated by Pakistan and Qatar. Despite an interim deal last week signaling a pause in hostilities, the discussions began with confusion. Iranian media initially reported a halt in talks due to Trump's threats, although US officials stated negotiations were continuing into early Monday. The agenda included deconfliction mechanisms for the Strait of Hormuz, enforcement of the Israel-Hezbollah ceasefire in Lebanon, Iran's nuclear program, and unfreezing billions of dollars in Iranian assets overseas.
Iran's decision to close the Strait of Hormuz, a move that would severely disrupt global oil shipments, cast a shadow over the talks. Tehran accused Israel of violating a truce in Lebanon and stated the closure was a response to the US failing to halt fighting there. US Central Command, however, reported increased commercial ship traffic in the strait on Saturday, with 55 merchant ships transporting cargo and over 17 million barrels of oil. The US had previously lifted a naval blockade of Iranian ports and pledged sanctions waivers as part of the interim deal, with Iran promising to reopen Hormuz, which handles approximately one-fifth of the world's oil and gas supplies. However, Iran now insists on requiring permission and mandatory insurance for ships to cross, a demand rejected by the US, Europe, and Gulf Arab states.
Market reactions included a 0.30% decline in US S&P 500 futures, signaling risk-off flows. The US Dollar Index (DXY) was also expected to find fresh demand amidst the renewed US-Iran tensions. The ongoing conflict, which began on February 28 with US-Israeli attacks on Iran, had initially caused significant disruption to global energy markets and a sharp rise in oil prices. However, recent diplomatic efforts had eased concerns about a prolonged supply shock, with oil prices having tumbled in the preceding week to pre-war levels.
