Oil Prices Extend Gains as Iran Ceasefire Concerns Intensify
Oil prices continued moving higher during Asian trading on Tuesday after posting strong gains in the previous session, as fears grew that the fragile ceasefire between the United States and Iran could collapse.
Market sentiment turned increasingly cautious after President Donald Trump warned that the current ceasefire agreement was “on life support,” reducing expectations for a quick diplomatic resolution to the conflict.
Brent crude futures for July delivery climbed 0.8% to trade above $105 per barrel, while U.S. West Texas Intermediate crude futures rose more than 1% to around $99 per barrel.
Trump Rejects Iran’s Latest Peace Response
Investor concerns escalated after Trump rejected Tehran’s latest response to a U.S.-backed peace proposal, calling it “totally unacceptable.”
The president described Iran’s response as “a piece of garbage” and warned that the ceasefire agreement was now at its weakest point since negotiations began.
Iran defended its position, stating that its demands remain focused on ending the war, removing the U.S. naval blockade, and restoring Iranian oil exports.
Tehran has also called for sanctions relief, financial compensation for war-related damage, and recognition of its sovereignty over the Strait of Hormuz.
Strait of Hormuz Remains Key Market Concern
Markets remain highly focused on the future of shipping through the Strait of Hormuz, one of the world’s most critical energy trade routes.
Approximately one-fifth of global oil and fuel supplies pass through the strategic waterway, making any disruption a major threat to global energy markets.
A CNN report released late Monday suggested Trump is increasingly considering restarting major combat operations against Iran as negotiations continue to stall.
Saudi Aramco CEO Amin Nasser warned that even if the Strait of Hormuz reopened immediately, global oil supply chains could take months to fully normalize.
Oil Rally Reverses Last Week’s Decline
Oil prices had dropped sharply last week after optimism grew that Washington and Tehran were moving closer toward a diplomatic breakthrough.
However, those expectations quickly faded following Trump’s latest comments and renewed fears of military escalation.
The return of geopolitical risk has once again pushed energy prices sharply higher.
Markets Await US Inflation Data
Investors are now turning their attention toward upcoming U.S. inflation data scheduled for release later on Tuesday.
Economists expect the Consumer Price Index (CPI) to accelerate as rising fuel prices linked to the Iran conflict begin feeding into broader energy inflation.
ING analysts forecast headline inflation to rise to 3.7% year-over-year, up from 3.3%, while core inflation is expected to edge higher as well.
Producer price data due on Wednesday is also expected to show increasing cost pressures linked to transportation and gasoline prices.
Higher Inflation Could Delay Fed Rate Cuts
Rising inflation could complicate the Federal Reserve’s policy outlook by strengthening expectations that U.S. interest rates will remain elevated for longer.
Markets had previously anticipated multiple rate cuts this year, but persistent inflation pressures are forcing investors to reassess those expectations.
Trump-Xi Meeting Also in Focus
At the same time, traders are closely monitoring Trump’s upcoming meeting with Chinese President Xi Jinping in Beijing later this week.
The talks are expected to cover several major global issues, including the Iran conflict, trade relations, artificial intelligence, and energy security.
Analysts believe the meeting could significantly influence the direction of the Iran crisis, given China’s role as Iran’s largest oil buyer and one of Tehran’s most important diplomatic partners.
