Oil Prices Continue to Rise Amid Heightened Tensions Between Washington and Tehran

SadaNews - Oil prices have risen as traders evaluate the prospects of reaching a nuclear deal with Iran, while U.S. President Donald Trump stated he prefers a diplomatic solution but warned of consequences if an agreement is not reached.

Brent crude rose near $72 per barrel after closing slightly lower on Monday, while West Texas Intermediate crude traded around $67.

Trump said in a social media post that it would be a "very bad day" for Iran if a deal is not reached, and he dismissed reports indicating that the Pentagon is concerned that a prolonged military campaign might be difficult.

Negotiations over a nuclear agreement are scheduled to resume on Thursday in Geneva, where Trump’s special envoy Steve Mnuchin and his son-in-law Jared Kushner are expected to meet again with Iranian Foreign Minister Abbas Araqchi.

Geopolitical Risk Premium

Concerns about the potential repercussions of a U.S. strike on Iran have contributed to rising futures contracts this year, despite expectations of a global supply surplus.

The United States has amassed military forces in the Middle East and ordered the evacuation of non-essential staff from its embassy in Beirut on Monday.

Sol Kafonik, a senior energy analyst at MST Marquee, said, "Oil markets are on the lookout for developments in the Iranian situation, with a healthy dose of skepticism towards any rhetoric calling for de-escalation." He added that the U.S. military buildup has added a risk premium estimated at about $10 per barrel to prices.

Strait of Hormuz in Focus

Any potential disruption by Tehran to shipping through the Strait of Hormuz remains the focal point of the oil market should the United States move forward with military strikes.

Very large crude carriers transporting crude oil and liquefied natural gas pass through this narrow waterway daily to deliver shipments to customers around the world.

Recent closures of parts of the Strait of Hormuz due to Iranian military exercises have contributed to increased rates for chartering oil supertankers.

The cost of chartering a very large oil tanker for a year is currently over $92,000 per day on average, according to data from Clarksons Research Services Ltd, the highest level in the available data since 1988.

In the latest transactions, Brent crude contracts for April delivery rose 0.5% to $71.83 per barrel at 1:04 PM in Singapore, while West Texas Intermediate crude contracts for April rose the same percentage to trade at $66.65 per barrel.