Oil rises again amidst lack of solutions for the Middle East conflict
Yesterday (21), the most active Brent contract closed down at USD 102.58/bbl (−2.3%) after reaching an intraday high of up to 4%. WTI closed at USD 96.35/bbl (−1.9%), with both contracts hitting their lowest levels in almost two weeks.
Despite rumors that Ayatollah Khamenei had issued a directive banning the transfer of enriched uranium stocks abroad—which increased the risk premium early in the session—the confirmation that Pakistani envoys would travel to Iran to continue mediations deflated part of this premium, pushing prices down.
This morning (22), Brent is trading at USD 105.88/bbl (+2.8%) and WTI at USD 98.88/bbl (+2.2%) as of 08:30 AM, with investors recalculating skepticism over an imminent deal. The market remains heavily influenced by narratives, with new statements from officials linked to the Middle East geopolitical situation weighing more intensely on quotations, while the physical balance of the commodity remains fragile.
Middle East conflict nears three months
Six weeks after the ceasefire declaration, talks mediated by Pakistan continue without concrete progress on two key points of the negotiation: the fate of Iran's enriched uranium stockpile and control of the Strait of Hormuz. Iranian Foreign Minister Abbas Araqchi met again with Pakistani Minister Mohsin Naqvi this Friday in Tehran, while Secretary Rubio signaled "some good signs" in the negotiations—language the market interprets as insufficient to reprice a resolution scenario.
Why this matters: As long as the deadlocks remain unresolved, the strait effectively remains closed to most traffic, keeping off the market the volume that previously accounted for 20% of global energy consumption. The toll system proposed by Tehran was dismissed by Rubio as "unworkable" for any deal, creating a diplomatic inconsistency difficult to address.
- Despite the implementation of the toll system, the volume of vessels passing through the strait still represents only 10–20% of what was observed in the pre-war period, with few tankers opting to make the crossing.
- The key variable also becomes the political timeline: Trump faces midterm elections in November with historically low approval ratings, generating pressure for a resolution.
Outlook: Meanwhile, the physical balance situation continues to deteriorate. The IEA warned this week that the summer demand peak combined with the absence of new Middle East supply could push the market into the "red zone" in July-August, resulting in even stronger pressures on global commodity reserves.
- Even with expectations that OPEC+ will announce a new increase in production quotas for July, the suspension of flows through the Strait of Hormuz renders the delivery of these additional barrels to the market unfeasible for members located in the Persian Gulf.
What to expect? If the coming days bring concrete indications of progress on the deadlock points, Brent should continue to give back part of the risk premium, heading towards USD 100/bbl again.
- Conversely, if negotiations stall until June, the approach of the period considered the "red zone" by the IEA is likely to result in a more significant bullish momentum.
Daily table - Price variation in the previous session
Source: ICE, NYMEX. Prepared by: StoneX.
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