Oil prices experienced volatility as US President Donald Trump issued new threats to Iran, coinciding with the start of peace talks in Switzerland. Brent crude initially climbed as much as 2.2% to $82.30 a barrel, while West Texas Intermediate neared $77. This surge was attributed to Trump's threats regarding Hezbollah and reports from Iran that it had again closed the Strait of Hormuz, a critical waterway for global energy supplies. The fluctuations occurred as traders assessed the implications of these developments on oil markets.
The talks between the US and Iran, mediated by Pakistan and Qatar and involving US Vice President JD Vance, aimed to establish a lasting peace deal, address Iran's nuclear program, and ensure the permanent reopening of the Strait of Hormuz. These discussions followed an interim deal signed last week, which had signaled a pause in hostilities. However, the commencement of talks was overshadowed by conflicting reports, with Iranian media suggesting a halt to discussions following Trump's threats, while US officials confirmed talks were ongoing.
The Strait of Hormuz's status remained a point of contention. Iran claimed to have shut the strait, arguing that the US had not fulfilled its commitment to halt fighting in Lebanon. Iran also stated that substantive issues like its nuclear program would not be covered in the initial talks. Conversely, US officials disputed the strait's closure, though commercially available shipping data indicated an immediate impact on maritime traffic. Energy Secretary Chris Wright affirmed that the US was still escorting ships through the strait, demonstrating its ability to transit with or without Iran's cooperation.
The US-Iran memorandum, reached last week, included provisions for reopening the strait and ending hostilities, particularly in Lebanon. It also outlined 60 days of further talks on Iran's nuclear program in exchange for economic benefits, such as sanctions waivers and the unfreezing of blocked assets. Trump had previously agreed to the interim deal to prevent a global economic depression from high oil prices caused by the strait's closure. Despite the new ceasefire announcement in Lebanon, there was little evidence of an end to the fighting, a situation Iran used as justification for its actions regarding the strait. Oil prices had seen a decline in the past week before the recent surge, reaching levels not seen since the war began on February 28.
