New Delhi: Global oil markets turned volatile after the United States Central Command confirmed strikes in southern Iran, even as diplomatic efforts to end the ongoing conflict showed tentative progress. The developments have heightened uncertainty around energy supplies, particularly through the strategically vital Strait of Hormuz.
Brent crude futures rose nearly 2% in early Asian trade on Tuesday, climbing by $1.40 to $97.56 per barrel. This rebound came after a sharp 7% drop in the previous session, reflecting the fragile sentiment in global oil markets. Meanwhile, US West Texas Intermediate crude was trading at $91.25 per barrel, recovering slightly but still significantly lower compared to last week’s levels.
Military strikes keep markets on edge
According to the US Central Command, the strikes targeted locations in southern Iran, including vessels suspected of laying mines and missile launch facilities. The US described these actions as defensive measures aimed at protecting its forces from perceived threats.
Iranian media reported explosions in the southern port city of Bandar Abbas and nearby coastal areas. These regions lie close to the Strait of Hormuz, a critical chokepoint through which nearly one-fifth of the world’s oil and gas supply passes.
The escalation has intensified concerns about supply disruptions. Since the conflict began, Iran has effectively restricted most non-Iranian shipping in the Gulf, significantly impacting global energy flows and pushing oil prices higher by as much as 50% during the period.
Diplomatic efforts continue amid tensions
Despite the military developments, diplomatic negotiations are ongoing. Iranian officials, including the country’s top negotiator and foreign minister, recently held talks in Doha with mediators to explore a potential agreement with the United States.
Both sides have indicated progress towards a preliminary memorandum of understanding that could halt hostilities and allow a 60-day window to negotiate a comprehensive peace deal. Reports suggest that under a possible agreement, Iran may begin clearing mines in the Strait of Hormuz within 30 days, enabling the safe passage of international vessels.
Market analysts note that traders are closely monitoring these developments, with many betting on a breakthrough that could ease supply constraints and stabilise prices.
Shipping activity shows early signs of movement
Recent ship-tracking data has shown limited but notable activity in the region. Several liquefied natural gas tankers have successfully navigated through the Strait of Hormuz, heading towards countries including Pakistan, China and India. Additionally, a supertanker carrying Iraqi crude reportedly resumed its journey after being stranded for nearly three months.
These movements suggest that while tensions remain high, there are cautious signs of normalisation in shipping operations, contingent on further de-escalation.
Global market implications
The situation underscores how quickly oil markets can swing between optimism and disruption. Any escalation in the conflict risks further tightening global supply, while progress in negotiations could lead to a sharp correction in prices.
Statements from Donald Trump have also added to the uncertainty. The US President reiterated demands for Iran to surrender its enriched uranium as part of any deal, a condition that could complicate negotiations.
Analysts warn that previous attempts to reach an agreement have failed at critical stages, raising the possibility that the current talks could also collapse unexpectedly.
Conclusion
The recent rise in oil prices reflects a complex interplay of geopolitical tensions and diplomatic efforts. While the prospect of a deal offers hope for stabilising markets, ongoing military actions highlight the fragility of the situation.
For global energy markets, the Strait of Hormuz remains a key flashpoint. Any disruption in this region has immediate and far-reaching consequences, affecting supply chains, inflation and economic stability worldwide. As negotiations continue, markets are likely to remain volatile, with prices reacting swiftly to both positive and negative developments.