SerpApi.Org
- Oil prices were almost 4% higher on Wednesday, as conflict in the Middle East continued to escalate.
- U.S. forces carried out their 11th consecutive evening of strikes on Iran overnight.
- The Strait of Hormuz, key to the shipping of oil, remains a sticking point in negotiations between the two sides.
Oil prices were about 4% higher on Wednesday morning following the eleventh consecutive round of U.S. strikes against Iran overnight, as Secretary of State Marco Rubio said the Strait of Hormuz remains a sticking point between the two sides.
Brent crude futures, the international benchmark, traded about 4% higher at $94.76. U.S. West Texas Intermediate crude futures were up 3.9% to trade at $87.61.
Speaking to reporters at the ASEAN Foreign Ministers' meeting in the Philippines on Wednesday, U.S. Secretary of State Marco Rubio said Washington remains willing to negotiate an end to the war.
"The U.S. would love to reach a diplomatic settlement, we'd love to reach an agreement if it were possible with Iran … where they say we'll no longer sponsor terrorism and we will not pursue a nuclear weapon or the things that you need for a nuclear weapon," he said.
But he also said that "right now they don't seem to be serious" about making a deal, adding that Tehran had made commitments in the Memorandum of Understanding reached last month, "and within two weeks violated it."
"You make a deal and then you violate the agreement, [then] that agreement's no longer valid," Rubio said. "That doesn't mean you can't have a future agreement, but ultimately that future agreement will have to be judged on whether or not you're complying with the conditions. And that deal called for the opening of the [Strait of Hormuz's] free and fair navigation."
While he reiterated that the U.S. remains open to diplomacy, Rubio said American forces would continue to defend transit through the waterway.
"We're going to continue to protect shipping, we think other countries should join us in that endeavor," he said. "The president has many options available to him, if they continue to insist on not being cooperative … I think Iran knows we have many options."
Earlier at the ASEAN meeting on Wednesday, Rubio had said Washington "will do what is necessary to protect our interests and also the interests of our allies."
His comments came a day after U.S. President Donald Trump told reporters Iran "desperately" wanted to meet to resume talks, but that Washington had "no interest" until Tehran showed willingness to engage "in a meaningful way."
"If we left right now, it would take Iran 20, 25 years to rebuild. And we're not finished at all… we're not leaving right now."
Tuesday saw the U.S. Central Command carry out its eleventh consecutive night of strikes against Iran.
Centcom forces targeted Iranian military operations centers, maritime capabilities, aircraft hangars, drone storage facilities, and military logistics infrastructure.
The military unit said the strikes had been completed to "further degrade Iran's ability to threaten commercial shipping in the Strait of Hormuz."
Rubio said Wednesday that the strait — a critical shipping route for oil and other vital commodities — remains a sticking point in bilateral talks, alleging that Iran "demands the right" to control the waterway. Allowing this to happen would set "a very dangerous precedent" for the world, he added.
"With no breakthroughs regarding Iran, the market focus returned to inflation over the last 24 hours, as Brent crude closed above $90/bbl for the first time in over a month, reviving fears about a wider stagflationary shock. And this morning we've seen a further rise above $92/bbl, so there's little sign of oil prices easing as the U.S. confirmed overnight they'd completed an 11th consecutive evening of strikes against Iran," Deutsche Bank's Jim Reid said in a note on Wednesday morning.
As energy prices continued to climb, investor bets on hawkish Federal Reserve policy measures mounted.
"The probability of a July hike was back up to 26% by [Tuesday's] close, the highest since last week's downside surprise in the U.S. CPI print," Reid wrote on Wednesday. "It was at 45% the day before CPI and as low as 10% the day after."
As of Wednesday morning, money markets were pricing in a 24.1% chance of a rate hike from the Fed this month, and a 69% chance of at least a quarter-point hike in September, according to the CME's FedWatch tool.
Analysts at ING said in a note released on Wednesday morning that there were "mounting supply risks" in energy markets, as hopes for a temporary ceasefire between the U.S. and Iran faded.
"The disruptions facing the market don't end in the Middle East. In the Black Sea, Russia's CPC terminal has stopped receiving oil from Kazakhstan, with loadings suspended following ongoing attacks on tankers," they noted.
"The longer the suspension drags on, the greater the likelihood that Kazakhstan will be forced to curb upstream production. Volumes shipped from the CPC terminal are significant, with around 1.7m b/d loaded in June."
