Brent crude oil prices increased by over 3% on 26 May after US military strikes in Iran intensified uncertainty over negotiations to end the ongoing war and reopen shipping routes through the Strait of Hormuz.
The global benchmark rose $3.04, or 3.2%, to $99.18 a barrel as of 08:20 GMT, following a 7% drop in the previous trading session, reported Reuters.
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The US military confirmed it had conducted what it described as defensive strikes in southern Iran.
The action occurred while talks aimed at securing a potential peace deal were underway in Doha.
Iran’s chief negotiator and foreign minister met in Qatar with the Qatari prime minister to discuss a possible agreement to end the three-month conflict.
Despite some optimism, US Secretary of State Marco Rubio signalled that reaching a deal could “take a few days,” lowering expectations for an immediate resolution and restoration of shipping flows through the region.
“We are still waiting for more details on a potential deal,” said Giovanni Staunovo at UBS. “Meanwhile, we see renewed tensions in the Middle East, while flows through the Strait remain restricted.”
US West Texas Intermediate crude was reported at $92.53 per barrel, down $4.07, or 4.2%, from Friday’s close, with no settlement on 25 May due to the US Memorial Day holiday.
Industry analysts suggest the outlook for oil supply is likely to remain tight even if current negotiations produce an agreement.
Ole Hansen of Saxo Bank said: “While differences between the parties have narrowed, any eventual peace deal would likely lead only to a gradual reopening, meaning the current tight supply outlook could take months to normalise.”
Iran has largely halted non-domestic shipments through the Strait of Hormuz, restricting about a fifth of global oil and liquefied natural gas (LNG) movements.
Limited passage resumed recently, with ship-tracking data showing three LNG tankers and an oil supertanker resuming transit after months of delays, bound for China, India, and Pakistan.
Indian buyers have responded by sourcing oil from Latin America, Africa, and Russia after disruptions from the Middle East, according to preliminary trade data.
