Oil prices climb on uncertainty around Iran peace negotiations
Tokyo, May 22
,: Oil prices climbed on Friday as uncertainty around peace negotiations continued to cloud the market, even as reports suggested that differences between the two sides have narrowed.
The sticking points over the uranium stockpile and control of the critical Strait of Hormuz continue to pose challenges to a breakthrough.
Secretary of State Marco Rubio said there have been "good signs" that have emerged from the talks, but he categorically said that a toll system in the Strait of Hormuz is unacceptable.
US President Donald Trump said that the uranium stockpile will eventually be recovered, while Iran continued to maintain that it is meant for peaceful purposes.
"We will get it. We don't need it, we don't want it. We'll probably destroy it after we get it, but we're not going to let them have it," Trump said at the White House.
The International Energy Agency warned that the oil could enter the "red zone" as peak summer demand, along with a lack of any new supply from the Middle East, could push up prices.
Brent crude jumped to $104.2, rising around 1.6%, while WTI crude was trading at $97.43, up more than a per cent.
Oil prices had traded lower on Thursday, falling 2% on hopes that positive signs from US-Iran peace negotiations would calm the markets. However, the lack of any diplomatic progress cast doubt among investors who are weighing the prospects of a prolonged uncertainty in the Middle East.
Citi, in a note, said that Brent could trade up to $120 a barrel in the near term.
"The timing and pace of the reopening of the Strait of Hormuz depends largely on the Iranian regime and is therefore difficult to call. It appears increasingly likely, in our view, that the Iranian regime will disrupt SoH flows for some time, but will eventually deal, as it balances the benefits of keeping the SoH disrupted relative to the benefits of re-opening the SoH," the note said.
Higher energy prices have stoked inflation fears globally as central banks become cautious. Bond markets have reacted sharply to the uncertainty and volatility in the energy markets, with yields climbing anticipating a hike in interest rates.
— ANI
Reader Comments
See this is what happens when global diplomacy is so fragile. Every time there's tension in the Middle East, our economy takes a hit. ₹120 per litre petrol is not impossible if Brent hits $120 😞 Hope the negotiations don't drag on.
As an investor, this uncertainty is a nightmare. The bond market is already reacting because central banks will have to hike rates to control inflation. We're seeing energy-driven inflation everywhere. The US should push harder for a peaceful resolution.
Trump saying they'll "destroy" the uranium stockpile after getting it... that's classic Trump diplomacy 😄 But on a serious note, the Strait of Hormuz is such a critical chokepoint. For a country like India that imports 80% of its oil, every day of disruption costs crores. We need to diversify our energy sources ASAP.
The IEA's "red zone" warning is alarming. As a student in economics, I'm watching how this cascading effect of oil prices → inflation → interest rate hikes is going to hit developing countries hardest. India will have to manage its fiscal deficit carefully while keeping fuel prices in check.
While I understand global market dynamics, I wish our government would do more to cushion the common man. Auto-rickshaw drivers, small transport operators, farmers - these are the ones who suffer most when diesel and petrol prices soar. Reduce excise duty, bring petrol under GST, something has to give!
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