Crude oil prices rose more than 2 per cent on Monday after US President Donald Trump said the ceasefire with Iran was “on life support,” leaving the Strait of Hormuz largely closed with no clear end in sight to the war.
Brent crude futures went up by $2.92 or 2.88 per cent to $104.21 a barrel, while the US West Texas Intermediate (WTI) crude futures increased by $2.65 or 2.78 per cent to settle at $98.07 a barrel.
President Trump on Monday said the ceasefire with Iran was “on life support,” after dismissing Iran’s response to a US peace proposal as “stupid.”
This came after the US floated a proposal aimed at reopening negotiations with Iran. The Middle East country on Sunday released a response focused on ending the war on all fronts, including one where America’s top ally, Israel, is fighting Iran-backed Hezbollah militants.
Iran also demanded compensation for war damage, emphasised its sovereignty over the strait, and called on the US to end its naval blockade, guarantee no further attacks, lift sanctions and remove a ban on Iranian oil sales.
After this, President Trump dismissed the offer in a social media post as “totally unacceptable.”
He also emphasised that the US continues to monitor Iran’s enriched uranium stockpiles via Space Force surveillance and warned of further strikes if a real end to the nuclear issue is not reached.
The war has impacted oil output by the Organisation of the Petroleum Exporting Countries (OPEC) as it declined to its lowest level since 2000, with production falling by 830,000 barrels per day to an average of 20.04 million barrels per day in April, according to a Reuters survey published Monday.
Kuwait, Saudi Arabia, and Iraq all saw significant output decreases as they were forced to shut in production due to the war, which started in late February.
The United Arab Emirates (UAE) was the only Gulf member that was able to increase production in April. The UAE was able to leverage the Fujairah terminal on the Gulf of Oman to bypass the bottleneck, allowing it to export more crude than its peers. The Emirate is targeting a production capacity of 5 million barrels per day by 2027 after it exited OPEC and OPEC+ this month.