Oil Surges Over 5% as Trump Declares Iran Deal Over

Oil prices rose sharply on renewed fears that conflict between the United States and Iran could again threaten tanker traffic through the Strait of Hormuz. Brent crude climbed $4.27 to $78.43 a barrel, a gain of 5.76 percent, while West Texas Intermediate rose $3.91 to $74.35, up 5.55 percent, both benchmarks reaching their highest levels since June 22. The moves followed President Donald Trump’s statement that the memorandum of understanding to end the conflict with Iran was over.

The price increase built on gains of roughly 3 percent the previous day after the United States revoked the general license authorizing sales of Iranian crude. Trump’s remark came after U.S. airstrikes on Iranian targets, which Central Command said responded to attacks on three commercial vessels in the strait. Iran’s Revolutionary Guards reported striking U.S. military sites in Bahrain and Kuwait. At least four tankers turned back from attempting passage, according to ship-tracking data.

The 60-day negotiation window brokered by Pakistan last month had allowed some normalization of flows. With that window now in doubt, the Brent three-month timespread moved into backwardation at $2.36 a barrel, its widest since June 16. Saxo Bank analyst Ole Hansen said the market was again pricing the risk that renewed attacks or a broader breakdown in relations could slow the return of supplies. MST Marquee head of research Sauk Kavoniv noted that Trump’s assertion raised the prospect of the strait re-closing.

Before the earlier truce, the strait carried about one-fifth of global energy supply. Traders who had built large short positions after prices fell to pre-war levels now face the reversal of those bets. U.S. stocks declined alongside the energy-market moves, extending volatility that began with the February outbreak of hostilities.