Synopsis
Oil prices rebounded on Thursday, recovering from an earlier significant decline as investors weighed mixed signals regarding Iran-U.S. relations. As reports suggested a potential deal to end the conflict, President Trump issued a stark warning of increased bombing if Iran rejected a peace deal, highlighting the precarious state of negotiations.
ETMarkets.comOil prices rebounded on Thursday. Investors are closely following developments between Iran and the United States. Oil price ended a two-day losing streak on Thursday and rebounded from a 10% drop in the previous session as investors assessed new developments in the Middle East as well as renewed concerns over tensions between Iran and the United States.
Sentiment was influenced by mixed signals regarding relations between Iran and the United States. While some reports suggested Washington and Tehran were close to a possible deal to end the war, US President Donald Trump took a more aggressive tone on Wednesday.
In an article for Truth Social, he warned that Iran would be bombed “at a much higher level” if it did not agree to a peace deal, highlighting how fragile negotiations remain.
Crude oil prices on May 7
Brent crude futures for July rose 0.91% to $102.19 per barrel. West Texas Intermediate Futures for June gained 1.23% to $96.25 a barrel.
Trump also referred to the U.S. military campaign, called Operation Epic Fury, saying it would end if Iran agreed to the terms that had been proposed, although he noted that outcome was uncertain. He added that if Iran complied, the US naval blockade of Iranian ports in the Gulf of Oman would end, which “would then allow Strait of Hormuz be OPEN TO ALL, including Iran.
He further warned that if no agreement was reached, “the bombings would begin” and would be “at a much higher level and intensity than before.”
The remarks followed an Axios report indicating that the United States and Iran were close to a one-page, 14-point memorandum of understanding. The project is supposed to put an end to the conflict and lay the foundations for new negotiations.
The report added that the United States expects a response from Iran on several key issues within the next 48 hours. Although no final agreement has been reached, sources said the two sides were closer than ever since the conflict began.
Iranian Foreign Ministry spokesman Esmaeil Baqaei said on Wednesday that Tehran was still studying the proposal and would submit its response through mediators in Pakistan. In an article on
Market analysts believe the risks remain high. Haitong Futures noted that the current ceasefire may prove temporary and the impasse in negotiations between the United States and Iran could trigger further escalation, which would likely push up oil prices.
Nuvama Institutional Equities added that if the Strait of Hormuz were to remain closed for an extended period, it could disrupt approximately 20 million barrels per day of crude flow. In this scenario, oil prices could potentially rise to between $110 and $150 per barrel.
(Disclaimer: The recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times.)
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