Oil prices were up by more than 5 per cent on Monday after Iran reportedly halted indirect negotiations with the United States, stoking fears of a renewed escalation of the tension that has gripped the markets.
Brent crude futures soared by $4.80 or 5.2 per cent to $95.92 a barrel, while the US West Texas Intermediate (WTI) crude futures rose $5.46 or 6.2 per cent to $92.82 a barrel.
According to a report from Iran’s state-affiliated Tasnim news agency, Iranian negotiators will immediately stop exchanging messages with the US through intermediaries. The dramatic pivot is reportedly a direct retaliation for ongoing ceasefire violations, specifically homing in on Israel’s military operations against the Iran-backed militia Hezbollah in Lebanon.
Plans are also being made for Iranian forces and their allies to completely block the Strait of Hormuz and take action elsewhere, including another key shipping route.
However, US President Donald Trump shrugged off the suspension of indirect talks with Iran in an interview with CNBC on Monday, saying he did not care if they were over.
Iran and the US have traded strikes in recent days, and Israel ordered troops to move further into Lebanon in its battle with the Tehran-backed Hezbollah militant group.
The Iranian government said the delay in the diplomatic process to end the war can be explained by a lack of trust as well as the Trump administration’s contradictory positions and Israel’s attacks on Lebanon.
The US has reviewed the draft agreement with advisers before sending it back for changes, with discussions expected to continue for at least another week. The latest proposal reportedly includes a 60-day cessation of hostilities, provisions to reopen the Strait of Hormuz, and a framework for future nuclear negotiations.
However, major sticking points remain, including the fate of Iran’s highly enriched uranium stockpile, the scope of sanctions relief, and the guarantees that Iran is demanding before signing a final agreement.
Alongside oil supply concerns, economic data from China over the weekend showed that stalling factory activity has added to fears the world’s second-largest economy is losing momentum.
Reuters also reported that Saudi Arabia is likely to cut its official selling prices for crude oil to Asia in July for a second consecutive month.
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