Oil prices rise after U.S. strikes in Iran increased tensions

SadaNews - Oil prices rose after a decline of over 5% on Wednesday, following new U.S. strikes in Iran, while Washington and Tehran remained at odds over how to reopen the Strait of Hormuz.

Brent crude climbed close to $95 a barrel, while West Texas Intermediate was near $91.

U.S. forces launched airstrikes on a military site and struck other targets near Hormuz, according to a U.S. official. Separately, Kuwait's air defenses stated they were confronting hostile missile and drone attacks.

President Donald Trump said on Wednesday that he was "not satisfied" with the talks, while the White House denied an Iranian report about a draft agreement stating that Tehran and Oman would oversee the waterway. Trump added that "the strait will be open to everyone," stating that the U.S. would "monitor it."

New strikes and a dispute over Hormuz

The crude is still on track for a second weekly decline, due to optimism that the warring parties will succeed in reaching at least a temporary agreement, despite challenges.

Sticking points in the negotiations include the country's nuclear program and Iran's desire to control Hormuz, which is still under a dual blockade imposed by both Tehran and Washington.

Adding to the challenges, Trump said in a White House meeting that he would not approve a bad deal, insisting that the U.S. would not ease sanctions, a position that contradicted Iran's demand to end the attacks and gain access to frozen funds.

The president is also under pressure from hardline Republicans to continue the war, which is now entering its fourth month since it began in late February.

The U.S. Department of the Treasury has imposed sanctions on the "Strait of Hormuz Authority," according to a statement. The department said the authority "leads a scheme controlled by Iran that blatantly violates international law," highlighting Tehran's efforts to impose fees on vessels transiting the strait.

Chris Weston, head of research at Pepperstone Group Ltd in Melbourne, stated that while markets are pricing in the likelihood of reaching an agreement "with a mindset that sees the glass half full," the possibility of parties withdrawing from negotiations "remains a clear danger."

In the United States, an industrial group warned of another drop in oil inventories. The American Petroleum Institute reported that nationwide crude stocks fell by 2.8 million barrels last week, including a decline at the hub in Cushing, Oklahoma.

Official data is expected to be released later on Thursday.

Oil inventories add new pressure

Joe DeLaura, global energy strategist at Rabobank, said that "the oil market is very reassuring right now," noting that draws from strategic petroleum reserves, along with a sharp drop in China's imports, are helping absorb part of the supply loss caused by the war.

He added, "By mid-July, if China begins importing again when withdrawals from strategic petroleum reserves end, we will be at a very steep upward inflection point for many refined products," describing a potential price surge.

The failure to craft an agreement to end the conflict threatens to prolong oil supply disruptions, which have caused a sharp spike in bond yields since late February, reigniting inflation. Central banks, including the Federal Reserve, are expected to ultimately raise interest rates in response.