By: Economy Middle east

Oil prices increased on Tuesday due to supply concerns after Iran denied participating in talks with the United States to conclude the conflict. This statement contradicted U.S. President Donald Trump, who had indicated that a deal could be reached in the near future. 

Brent futures rose $4, or 4.17 percent, to $99.92 a barrel at 09:24 Dubai time, while U.S. West Texas Intermediate (WTI) climbed $3.56, or 4.04 percent, to $91.69. 

Previously, crude futures had dropped more than 10 percent on Monday after the U.S. President ordered a five-day delay to attacks on the power plants of Iran, claiming that discussions with unnamed Iranian officials had produced “major points of agreement”.

Hormuz halts energy shipments

The ongoing conflict has nearly halted the shipment of approximately one-fifth of the global supply of oil and liquefied natural gas through the Strait of Hormuz. Despite this, two tankers bound for India successfully sailed through the strait on Monday. Tehran rejected the claims of contact with Washington, dismissing them as an effort to manipulate financial markets. Simultaneously, the Revolutionary Guards of Iran stated they had attacked U.S. targets and described the comments from the U.S. administration as “worn-out psychological operations”. Reports from the Fars news agency indicated further attacks on energy infrastructure, including hits on a gas company office and a pressure-reduction station in Isfahan, as well as a projectile striking a gas pipeline feeding a power station in Khorramshahr.

Market forecasts and supply mitigation

Analysts at Macquarie suggested that if the strait remains effectively closed until the end of April, Brent could potentially reach $150 a barrel. To mitigate supply shortages, the U.S. has temporarily waived sanctions on Iranian and Russian oil already at sea. Industry sources noted that traders have since offered Iranian crude to Indian refiners at a premium to ICE Brent. 

Fatih Birol, the Executive Director of the International Energy Agency, stated on Monday that the agency is consulting with European and Asian governments regarding possible further releases of strategic reserves if necessary. Nevertheless, analysts believe markets are bracing for disruptions at least until April, which continues to provide a tailwind for Brent while maintaining inflationary momentum.