Oil rises as US and Iran make conflicting claims on talks

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SINGAPORE – Oil climbed on March 26 as the US and Iran offered conflicting comments on efforts to end the war that has shuttered the Strait of Hormuz, choked off swathes of crude production, and stoked concerns of a global energy crisis.

Brent crude, the global oil benchmark, rose 1.1 per cent to US$103.33 as at 8.27am Singapore time, after losing more than 2 per cent on March 25. The US benchmark, West Texas Intermediate, climbed 1.2 per cent to US$91.38.

While the White House insisted peace talks are ongoing, Tehran rejected the US overtures and issued its own conditions, including sovereign control over the critical waterway.

Brent crude is on pace for the biggest monthly gain since 1990 as the conflict engulfs the energy-rich Middle East and sends shockwaves through the global economy, hitting Asia especially hard. The near-total closure of Hormuz has meant millions of barrels of lost daily oil output, while supercharging product prices from diesel and petrol to jet fuel.

Earlier on March 25, the White House mixed offers of diplomacy with threats of another wave of attacks in the war, which Washington started with Israel at the end of February. US President Donald Trump “does not bluff and he is prepared to unleash hell”, press secretary Karoline Leavitt said.

Traders’ main focus remains the strait, with traffic through the conduit linking the Persian Gulf to global markets at a trickle. Vessels seeking transit under Iranian protection are being asked for lists of crew and cargo, plus voyage details, to get a green light from the Islamic Revolutionary Guard Corps.

“Iran controls the strait; he needs the strait open,” said Mr Aaron Stein, president of the Foreign Policy Research Institute, referring to the US leader. “He can do that consensually or coercively. He’s trying to do both,” Mr Stein added. “We’re gonna yo-yo up and down on price as traders try and glean what will happen.”

While Mr Trump has not announced plans, people familiar with the matter have said the Pentagon ordered the deployment of two Marine Expeditionary Units – made up of about 5,000 troops, plus aircraft and landing vehicles – to the region. On March 24, a person familiar with the matter said Mr Trump was also sending more than 1,000 soldiers from the Army’s 82nd Airborne Division.

As the conflict drags on, governments across Asia are preparing for worst-case energy scenarios that could include a prolonged disruption to flows. The Philippines declared a national emergency, citing an “imminent danger of a critically low energy supply”, while South Korea shifted into crisis mode.

Meanwhile, Washington also announced a rescheduled summit between Mr Trump and Chinese leader Xi Jinping that will take place in Beijing on May 14-15. The highly anticipated meeting followed a delay that brought fresh uncertainty to relations between the world’s largest economies. BLOOMBERG