Oil jumps 2% as Iran-US peace prospects remain uncertain despite ongoing talks

Global oil prices rose around 2% on Friday morning after declining in the previous session, as continuing uncertainty over Iran-US peace negotiations kept crude markets volatile.

Oil traded higher amid conflicting signals on the prospects of a breakthrough agreement between Tehran and Washington, while supply disruptions linked to the Strait of Hormuz continued to weigh on global energy markets.

US president Donald Trump on Thursday said the US would recover Iran’s stockpile of highly enriched uranium.

However, a Reuters report citing an Iranian source said Iran's Supreme Leader Ayatollah Mojtaba Khamenei had directed that the country's near-weapons-grade uranium should not be sent abroad, raising fresh concerns over the possibility of a deal.

According to Iran's ISNA news agency, mediated discussions between the two countries are continuing, with both sides exchanging messages and draft texts in an effort to establish a formal framework for an agreement to end the conflict.

Citing a senior Iranian official, Al Jazeera reported that a deal was close, while adding that another Iranian source said it was too early to determine whether a final agreement could be reached.

Crude rebound

Around 7:45 AM, the July contract of Brent on the Intercontinental Exchange was trading at $104.52 a barrel, up 1.89% from its previous close, while the June contract of West Texas Intermediate on the NYMEX rose 1.47% to $97.77 a barrel.

US secretary of state Marco Rubio said on Thursday that there are “some good signs” that a deal to end the Iran war could be in sight.

Rubio, however, added that he does not want to be “overly optimistic”.

He also said any diplomatic agreement would become “unfeasible” if Iran imposed a toll on the Strait of Hormuz.

Supply shock

The blockade of the Strait of Hormuz by Iran, along with the additional naval blockade of Iran by the US, has severely disrupted global oil and gas supplies.

The executive director of the International Energy Agency, Fatih Birol, warned on Thursday that oil markets may soon enter a “red zone” in July or August as global inventories deplete and summer travel demand strengthens.

He said the single most important solution to the energy shock is a full and unconditional reopening of the strategically vital Strait of Hormuz.

India has also been affected by the energy shock.

The government, however, has maintained that despite supply disruptions in cooking gas, the country has adequate supplies of crude oil, petrol and diesel.

In a statement on Thursday, the union ministry of petroleum and natural gas said: “All Retail outlets are operating normally across the country. Middle East crisis has resulted in abnormal increase in the crude prices. In order to protect consumers from this impact, the Government of India has decided to absorb a part of this burden through a reduction in excise duties on petrol and diesel by Rs. 10/litre.”