(RTTNews) – Crude oil prices have edged higher on Friday, extending five sessions of gains, as expectations of a U.S.-Iran deal sank after the U.S. announced economic measures to isolate Iran, leaving the Strait of Hormuz closed and heightening supply concerns.
WTI Crude Oil for October month delivery was last seen trading up by $0.44 (or 0.51%) at $87.27 per barrel.
Yesterday, U.S. President Donald Trump announced crushing economic measures against Iran on a scale never seen before with an aim to isolate Iran. Trump also warned that any nation supporting Iran would face similar consequences.
Yesterday, in an interview with CNBC, U.S. Treasury Secretary Scott Bessent observed that Trump’s plans to squeeze Iran’s economy negated the need for any major U.S. military operations.
Bessent stated that this will be the greatest coordinated economic isolation in the history of the world.
Iran’s Foreign Minister Abbas Araghchi brushed Trump’s threats aside. Araghchi commented that the U.S. is merely trying to divert attention from the gargantuan debt the country is facing.
Araghchi referred to the U.S. Treasury Department’s data update from Wednesday indicating that the U.S. national debt crossed $40 trillion.
Iran warned its neighbors that support offered to any U.S. military operation would make them allies of Iran’s enemy. Iran also stated that its response to the U.S. threats would be devastating.
Weeks before, joining hands with Qatar and other U.S. allies in the gulf, Pakistan stepped up its efforts to bring the U.S. and Iran to the negotiating table, raising expectations of an interim deal that would facilitate the early reopening of the Strait of Hormuz and pave the way for discussing a broader deal later.
With the disagreements getting bolder than before and no breakthrough seen in the efforts to secure peace between the warring nations, investors scaled down expectations of the resumption of shipping traffic across the Strait of Hormuz.
The number of vessels transiting the Strait of Hormuz are far below the normal. Reuters quoted Kpler’s data as showing that seven commodity ships navigated the Strait of Hormuz on Thursday, down by 50% from the previous day’s traffic. While four ships entered the seaway, three exited.
Over the past two weeks, several U.S. leaders including Trump hinted that a deal with Iran could be imminent, leading to easing of crude oil prices. Traders are now factoring in a prolonged supply disruption.
In an interview with CNBC, a spokesperson for U.S. Central Command Tim Hawkins stated that the U.S. military has helped tankers transport more than 660 million barrels of crude oil through the Strait of Hormuz since May.
For months since the U.S.-Iran conflict began, the Hormuz region has been divided between two shipping lanes. The southern route through Omanian territorial waters is under the guard of the U.S. military.
Iran has warned ships transiting through the northern territory through Iranian territorial waters to coordinate with Iranian authorities to avoid attacks.
At the Bab el-Mandeb Strait where Yemen’s Houthi militants have announced a blockade on all Saudi Arabia-linked vessels, traffic slowed compared to the two previous days with commodity ships totaling only 23 against 34 on both prior days separately.
In Europe, Ukraine’s military launched an attack on a Russian oil refinery in the city of Perm.
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