Oil Steadies as US-Iran Talks Stall, Keeping Hormuz Blocked

Paul Sankey, founder at Sankey Research, discusses the path ahead for energy as the Strait of Hormuz remains blocked.

Oil steadied as the US and Iran remained locked in a battle for control of the Strait of Hormuz, after failing to meet for a fresh round of peace talks.

Brent futures traded near $102 a barrel in London, after gaining almost 13% in the three previous sessions. US President Donald Trump said the truce agreed April 7 would stay in place indefinitely while Washington waits for Iran to submit a new peace proposal, although Tehran says it has no plans to take part in negotiations imminently.

Meanwhile, US forces said that earlier this week they intercepted two Iranian oil tankers that tried to evade an American blockade. On Wednesday, Tehran demonstrated its grip over the vital Hormuz chokepoint, attacking vessels and diverting two of them into its waters. Flows through the waterway have ground to a halt.

“As long as flows through the Strait remain restricted, the market keeps tightening and oil inventories keep falling, oil prices will remain supported,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich. Traders had bid down prices last week amid “some hope of talks in Islamabad,” but after Iran declined to send a negotiating team to the Pakistani capital, crude rose, he added.

The war has rattled energy markets since it started at the end of February, with the near-closure of Hormuz causing a sharp drop in flows from major oil and gas producers in the Persian Gulf. The US maintained its naval blockade to pile pressure on the Islamic Republic, in a move Foreign Minister Abbas Araghchi called a violation of the ceasefire. US forces boarded a supertanker carrying Iranian oil in the Indian Ocean as the navy steps up its blockade of the Islamic Republic’s shipping.

The overnight maneuver involved the sanctioned vessel Majestic X, the Pentagon said in a statement on X. The ship is also known as the Phonix, a Very Large Crude Carrier able to transport 2 million barrels of oil, and industry databases show it sailing under a false flag.

As well as turning back freighters that are attempting to leave the Persian Gulf, the US is blocking and boarding carriers thousands of miles from Iranian waters. That’s depriving Tehran’s customers, by far the biggest being China, of millions of barrels of supply.

For America’s blockade to work, it needs to inflict enough economic pain on Tehran that it’s forced to accept US demands. At the same time, though, Iran continues to block almost all shipping through the Strait of Hormuz, crushing oil supply to the global market and jeopardizing economic growth the world over. Tehran continues to keep Hormuz effectively closed, preventing the passage of hundreds of millions of barrels of oil and fuel as well as other commercial traffic.

Read: HORMUZ TRACKER: Shipping Near Total Freeze as US Blockade Holds

As of Thursday morning, only one Iran-linked bulk carrier was observed making the transit out of the Persian Gulf, according to vessel-tracking data compiled by Bloomberg.

Ships Attacked

On Wednesday, Iran attacked at least three vessels in the waterway, diverting two of them into its waters.

The boarding of Majestic X follows interdictions against the VLCCs Hedy and Hero II.

Both are anchored at Chabahar, an Iranian port on the Gulf of Oman, after being intercepted earlier this week, US Central Command said Wednesday on X. Analytics firm Vortexa previously said that the carriers had moved into the Arabian Sea, testing an American blockade that began early last week.

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