Oil prices advanced on Tuesday as fading expectations for a swift resolution to the conflict involving the United States, Israel and Iran renewed concerns over global energy supplies.
Brent crude futures rose $2, or 1.9%, to $106.21 per barrel, while U.S. West Texas Intermediate crude gained $2.31, or 2.4%, to trade at $100.38 by 0726 GMT. Both benchmarks had already climbed nearly 2.8% during Monday’s session.
Investor sentiment shifted after comments from U.S. President Donald Trump suggested that negotiations with Iran remain far from resolved. Trump said on Monday that the ceasefire with Tehran was “on life support,” highlighting major disagreements surrounding several key demands.
Among the disputed issues are the cessation of military operations across all fronts, the lifting of the U.S. naval blockade, the resumption of Iranian oil exports and compensation linked to war-related damage.
Iran also reiterated its position regarding sovereignty over the Strait of Hormuz, the strategically vital shipping route through which roughly one-fifth of global oil and liquefied natural gas supplies normally transit.
“Optimism regarding an imminent (peace) deal seems to be fading again and if we don’t see a deal by the end of May, then upside risks for oil prices are definitely on the table,” said DBS Bank energy sector team lead Suvro Sarkar.
The near-closure of the Strait of Hormuz has already disrupted global supply chains and forced several producers to scale back exports. A Reuters survey published Monday showed that OPEC oil production in April fell to its lowest level in more than 20 years.
“A genuine breakthrough toward a peace deal could trigger a sharp $8-$12 correction, while any escalation or renewed blockade threats would quickly push Brent back toward $115+,” said Tim Waterer, chief market analyst at KCM Trade.
Saudi Aramco chief executive Amin Nasser warned on Monday that disruptions to exports through the Strait of Hormuz could delay the return to balanced market conditions until 2027, potentially affecting around 100 million barrels of oil per week.
Falling U.S. Inventories Add to Supply Concerns
Supply worries were also reinforced by expectations of declining U.S. crude inventories.
Analysts surveyed by Reuters forecast that U.S. crude stockpiles fell by approximately 1.7 million barrels last week.
The anticipated drawdown comes against “a backdrop of continued strong net waterborne export flows for crude and products, across the next several weeks,” said Walt Chancellor, energy strategist at Macquarie Group.
Markets Monitor Trump-Xi Meeting and China Oil Trade
Investors are also closely watching the upcoming meeting between President Trump and Chinese President Xi Jinping scheduled for Thursday and Friday.
The talks come shortly after Washington imposed sanctions on three individuals and nine companies accused of helping facilitate Iranian oil shipments to China.
Meanwhile, tariffs introduced during the U.S.-China trade dispute have effectively halted most Chinese imports of U.S. crude oil and liquefied natural gas. Those imports were valued at approximately $8.4 billion in 2024, the year before Trump began his second presidential term.