Oil Rebounds to $104.3 as Doubts Over US-Iran Breakthrough Keep Supply Concerns Alive 

Mumbai, May 22: Oil prices climbed on Friday as investors turned cautious over the prospects of a quick breakthrough in ongoing U.S.-Iran peace negotiations, reviving concerns about prolonged supply disruptions in the Middle East and tighter global crude availability.

Brent crude futures rose 1.66% to trade at $104.3 a barrel, while U.S. West Texas Intermediate crude advanced 1.15% at $97.46 per barrel. The rebound came after both benchmarks had fallen sharply in the previous session on hopes that diplomacy between Washington and Tehran could ease tensions in the region.

Market participants, however, increasingly appeared unconvinced that negotiations would result in an immediate resolution.

Sticking Points

Major sticking points remain unresolved, including disagreements over Iran’s uranium stockpile and Tehran’s proposed toll mechanism in the Strait of Hormuz, one of the world’s most strategically important oil shipping routes. The narrow waterway handles a substantial share of global crude and fuel flows, making any disruption there a major risk for energy markets.

Benchmarks saw a rebound as markets doubted Iran diplomacy progress. Source: Oilprice.com 

A senior Iranian official told news agency Reuters that while negotiations had narrowed differences between the two sides, no final agreement had been reached yet. Meanwhile, U.S. Secretary of State Marco Rubio acknowledged that talks had shown “some good signs” but maintained that Washington would not accept any move that threatened free passage through the Strait of Hormuz.

On Edge

The uncertainty has kept traders on edge as fears persist over the impact of the Iran conflict on global supply chains. Reuters reported that disruptions linked to the crisis have affected nearly 14 million barrels per day of crude supply, equivalent to roughly 14% of global oil production.

The rise in oil prices has also reignited concerns around global inflation at a time when central banks are already grappling with sticky price pressures and elevated bond yields.

For oil-importing countries such as India, sustained high crude prices could widen trade deficits, pressure the rupee and complicate inflation management. Higher energy costs may also weigh on sectors heavily dependent on fuel and raw materials, including aviation, paints, chemicals and logistics.

At the same time, upstream energy companies and oil producers could remain in focus if crude prices continue to stay elevated.

Oil Hostage

Investors are also monitoring supply responses from producer groups. OPEC+ is expected to discuss a possible increase in output for July, though analysts believe any incremental rise may be insufficient to fully offset disruptions stemming from the Middle East conflict.

For now, oil markets remain hostage to geopolitical headlines, with every update from Washington or Tehran capable of triggering sharp swings in prices and investor sentiment.

Source:

• rates from oilprice.com