Oil jumps over 5% after Trump says deal with Iran 'over'

Oil prices jumped more than 5% on Wednesday, hitting a two-week high after US President Donald Trump said the memorandum of understanding to end the conflict with Iran was “over”, renewing fears of disruptions to Middle East oil supplies.

Brent crude futures gained $3.82, or 5.15%, hitting $77.98 a barrel at 0832 GMT, while US West Texas Intermediate crude climbed $3.70, or 5.25%, to $74.14 a barrel.

The benchmarks are at their highest levels since June 23.

Both rose about 3% on Tuesday after the US revoked the general licence authorising the sale of Iranian crude.

Speaking ahead of a NATO summit in Ankara, Trump said the interim pact to end the war that the US and Israel launched against Iran in February was “over”, adding he didn’t want to engage with Tehran.

“The latest developments have effectively thrown the future of the 60-day negotiation process into doubt,” said Bjarne Schieldrop, chief commodities analyst at SEB.

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“In my view, a price closer to $80 a barrel is more consistent with current market fundamentals than $70,” he added.

The US airstrikes were in response to Iranian attacks on three commercial vessels that were transiting the Strait of Hormuz, US Central Command said on Tuesday.

Iran’s Revolutionary Guards then said they targeted US military sites in Bahrain and Kuwait early on Wednesday.

“Four oil and gas tankers have reportedly either decided not to transit the strait or been forced to turn around after Iran declared that the only safe shipping route through the Strait of Hormuz is the one designated by Tehran,” said PVM analyst Tamas Varga.

After the US and Iran signed their truce agreement last month, oil prices tumbled back to pre-war levels and traders amassed large short positions in oil futures, betting that prices would fall further.

Expectations of a wave of pent-up Middle East supply coming onto the market caused the price declines.

Iran did not take responsibility for the vessel attacks, but Qatar blamed Iran for them, including one on a Qatari liquefied natural gas tanker, which reported being struck by a drone that caused a fire in its engine room.

The attacks renewed concerns about tanker traffic through the Strait of Hormuz, which carried cargoes equal to about one-fifth of global energy supply before the war began in late February.

Since the start of the conflict, nations have drawn down their inventories to make up for the supply shortfall.

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US crude oil inventories fell again last week, market sources said on Tuesday, citing data from the American Petroleum Institute.

Analysts polled by Reuters had expected crude stockpiles to decline by about 2.4 million barrels in the week ended July 3.