Price of oil rises as Iran talks remain stalled and Strait of Hormuz closed

Financial expert says US blockade of Iranian ports strains oil system, with consequences for future prices, while Qatar warns of ‘frozen conflict’ if resolution is not found

Oil prices rose Wednesday as talks to end the US-Israeli war with Iran appeared to be at a standstill and the crucial Strait of Hormuz was no nearer to being reopened.

While the White House said US President Donald Trump and his team were considering Tehran’s latest proposal to restore traffic through the narrow waterway, the pathway for a fifth of the world’s oil and liquefied natural gas, CNN and the Wall Street Journal reported that Trump was skeptical of the plan.

The Islamic Republic’s plan, submitted this week, would reportedly see it lift its chokehold on the strait and have Washington end its retaliatory blockade on the country’s ports as talks continued, while delaying negotiations on Tehran’s nuclear program to a later stage.

While US Secretary of State Marco Rubio said Iran’s proposal was “better than what we thought they were going to submit,” he rejected shelving the nuclear issue and insisted any eventual deal had to be “one that definitively prevents them from sprinting towards a nuclear weapon.”

Iranian Defense Ministry spokesman Reza Talaei-Nik said Washington “must abandon its illegal and irrational demands,” adding that the United States was “no longer in a position to dictate its policy to independent nations.”

Qatar warned of a “frozen conflict” if a definitive resolution is not found.

Iran’s blockade of the strait began soon after the US and Israel launched their war with Iran on February 28 in a bid to destabilize Iran’s regime and destroy its ballistic missile and nuclear programs, causing a sharp rise in energy prices worldwide.

Concerns about the stalled talks have pushed crude prices higher for more than a week, with Trump’s decision to cancel his envoys’ trip to negotiations in Pakistan last weekend adding to the downbeat mood.

Brent is above the level it hit before the two sides announced a ceasefire at the start of April, while West Texas Intermediate broke $100 Tuesday for the first time in two weeks.

Both contracts continued to rise Wednesday, with Brent holding above $113 and WTI above $101.

“Iran wants the blockade lifted and access to its flows restored,” wrote Stephen Innes at SPI Asset Management.

“Washington holds that lever and is in no hurry to give it away without extracting value.”

“Meanwhile, the longer this drags on, the more second-order effects start to bite. Storage pressure builds, production risks emerge, and the system begins to strain in ways that futures prices cannot ignore,” he added.

There was little major reaction to news that key producer the United Arab Emirates had decided to withdraw from the OPEC and OPEC+ oil cartels on Friday, calling it a strategic decision.

Still, CNN also cited sources familiar with the mediation as saying the two sides were not as far apart as they seemed.

It added that intense diplomacy continued and talks were focused on a staged process, with the first part of a potential deal aimed at returning to the pre-war status and reopening the strait.

Iran’s nuclear program would be dealt with down the line, it said.

Despite the uncertainty, Asian equity markets mostly rose with Hong Kong up more than one percent, while Shanghai, Seoul, Wellington, Manila, Bangkok, Mumbai and Jakarta also advanced.

Sydney, Singapore and Taipei fell along with London, Paris and Frankfurt.

Tokyo was closed for a holiday.

Traders were given a weak lead from Wall Street, where the Nasdaq led losses owing to a tech selloff that came on the back of a report in The Wall Street Journal that ChatGPT-maker OpenAI had missed targets on the number of users and revenue.

The news came as markets gear up for the release of earnings from Wall Street titans Amazon, Google, Meta and Microsoft this week.

The Federal Reserve will also conclude a two-day meeting later in the day, with investors keeping tabs on its outlook for inflation and interest rates as energy costs soar.