Oil climbs over 1% on reports of complications in US-Iran peace talks

Oil prices rose more than 1% on Thursday after a Reuters report stated that Iran’s Supreme Leader had issued instructions not to send Iran’s near-weapons-grade enriched uranium abroad.

The report, citing two senior Iranian sources, indicated that Iran is taking a tougher stance on one of the United States’ main demands in the peace negotiations. Ayatollah Mojtaba Khamenei’s decision could further complicate talks aimed at ending the war between the United States, Israel, and Iran.

Brent crude futures rose by $1.39, or 1.3%, to $106.41 per barrel, while US West Texas Intermediate crude gained $1.56, or 1.6%, to $99.82 per barrel.

Both benchmarks had fallen around 5.6% on Wednesday to their lowest levels in more than a week after US President Donald Trump said negotiations with Iran had entered their final stages.

In a diplomatic development, Pakistan intensified efforts to accelerate peace talks between the United States and Iran, while Tehran announced it was reviewing the latest US responses. Trump suggested he may grant Iran “a few more days” to provide the “right answers,” though he also reiterated that he is prepared to resume attacks if necessary.

Analysts at ING said in a note that markets have seen similar situations several times before, which often ended in disappointment, while forecasting Brent crude to average $104 per barrel during the current quarter.

Iran warned against any further attacks and announced new measures to strengthen its control over the vital Strait of Hormuz, which remains largely closed to shipping traffic.

Before the war began, the strait handled oil and liquefied natural gas shipments equivalent to around 20% of global energy consumption.

Economic data released on Thursday showed eurozone economic activity contracted at the fastest pace in more than two and a half years during May, as higher living costs driven by the war weakened demand for services and accelerated job cuts.

Growing drawdowns from oil inventories

Iran announced on Wednesday the creation of the “Persian Gulf Strait Authority,” confirming the enforcement of a “controlled maritime zone” inside the Strait of Hormuz.

Iran had effectively closed the strait in response to the US and Israeli attacks that triggered the war on February 28. Although most combat operations stopped following the April ceasefire, Iran continues restricting shipping movements, while the United States maintains a blockade on Iranian coastlines.

Supply disruptions from the Middle East have forced consuming nations to rapidly draw down commercial and strategic inventories, raising concerns over the depletion of global reserves.

The US Energy Information Administration said on Wednesday that the United States withdrew around 10 million barrels from its Strategic Petroleum Reserve last week, the largest drawdown ever recorded. The data also showed a larger-than-expected decline in US crude inventories.

Kim Fustier, Head of Global Oil and Gas Research at HSBC, said oil prices have “remained relatively resilient despite the scale of disruptions in the Middle East.”

She added that weaker Chinese demand, combined with increased oil exports from the Atlantic Basin led by the United States, along with rapid strategic inventory drawdowns, helped ease immediate supply shortage fears and reduce the severe imbalances that emerged at the beginning of the crisis.