Oil prices turned lower Monday after Iran said negotiations with the U.S. could be pursued based on Tehran’s interests, raising investors’ hopes that diplomacy could end the sharp escalation in fighting.
Brent crude futures, the international benchmark, were last seen trading 9 cents lower at $88.01 per barrel. U.S. West Texas Intermediate crude fell 25 cents to $82.24 per barrel.
Iran’s Foreign Ministry spokesman Esmail Baghaei told reporters at a press conference that intermediaries had continued to exchange messages with Tehran during the latest round of U.S. strikes.
Brent prices jumped nearly 4% overnight to break $90 per barrel, after the U.S. confirmed at least three service members have died during the recent fighting.
The U.S. has bombed Iran for nine consecutive nights in retaliation for repeated attacks on oil tankers transiting the Strait of Hormuz. Tehran is trying to force ships to transit the strait through its territorial waters. Its attacks have killed at least two seafarers and injured more than a dozen this month.
Iran has responded to the U.S. strikes by firing missiles at Washington’s Gulf allies. Tehran’s Houthi allies in Yemen, meanwhile, declared a maritime embargo against Saudi Arabia on Monday.
The Houthis’ move could exacerbate the oil supply disruption triggered by Iran’s tanker attacks in Hormuz. The militants have repeatedly threatened to close the Bab el-Mandeb Strait, which connects the Red Sea to global markets.
The Saudis have diverted millions of barrels of oil per day through a pipeline to an export terminal on the Red Sea. Those exports have acted as a crucial relief valve for the global crude market during the U.S.-Iran war.
U.S. gasoline prices notched $4 per gallon again on Monday, according to AAA, amid persistent instability facing traffic in the strategically vital Hormuz.
The national average price for regular gasoline was last seen at $4 or higher on June 17, when the U.S. and Iran signed an interim agreement intended to reopen the the strait and stop the fighting.
Amrita Sen, founder and director of research at Energy Aspects, said a substantial slowdown in shipping traffic through the Strait of Hormuz and depleted global inventories could push oil prices to more than $100 per barrel.
“The market is still quite complacent despite the price increase we have seen,” Sen told CNBC’s “Access Middle East” on Monday.
