Oil Holds Decline as Traders Weigh Trump’s Latest Iran Threats
(Bloomberg) -- Oil held a dip as traders weighed President Donald Trump’s latest threat to resume strikes on Iran.
Brent traded below $111 a barrel, after losing 0.7% on Tuesday, while West Texas Intermediate was below $104. Trump said that the Iran war is going to end “very quickly” and that Iran “wants to make a deal badly” at the White House Congressional Picnic.
Trump’s remarks followed earlier comments that the US “may have to give them another big hit” if Tehran rejects American peace terms, less than a day after he said he had called off an attack. The comments renewed concerns over a return to hostilities, though traders remain cautious after repeated threats of military action since the April 8 ceasefire failed to materialize.
When asked how long he would wait, Trump said: “I’m saying two or three days, maybe Friday, Saturday, Sunday. Something maybe early next week — a limited period of time.”
“Markets need the threat to be a lot more imminent,” said Vishnu Varathan, head of macro research, Asia ex-Japan at Mizuho Securities.
Oil also fell alongside broader markets, as mounting inflation concerns fueled a rise in global bond yields. With US 10-year bond yields rising well above 4.5%, markets may have a greater incentive to bet on Trump backpedaling, Varathan said.
Now in its 12th week, the war has choked traffic through the Strait of Hormuz, driving global energy prices and inflation higher. The US also seized an Iran-linked tanker in the Indian Ocean overnight — at least the third such seizure targeting Tehran’s shadow fleet, the Wall Street Journal reported.
With no resolution in sight, news that NATO is discussing escorting ships through the strait should the route remain closed past early July also weighed on futures. Investors have increasingly priced in a prolonged closure, according to a Goldman Sachs Group Inc. poll earlier this month — meaning a NATO-led effort could return supply to market faster than expected.
At a meeting in Beijing on Wednesday, Chinese President Xi Jinping renewed calls for a ceasefire in the Middle East during talks with Russian counterpart Vladimir Putin, state news agency Xinhua reported, as the two leaders sought to reinforce ties amid the wars in Iran and Ukraine.
Meanwhile, White House officials are holding firm against restricting oil exports even as domestic inventories dwindle. An industry report indicated US crude stockpiles dropped by 9.1 million barrels last week, which would be the biggest decline since September if confirmed by official data due later Wednesday.
On Tuesday, a massive Brent crude put options bet equivalent to 134 million barrels traded in a single block. That rattled a market already on high alert for unusual flows.
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