Oil Prices Edge Up Amid Iran-Israel Tensions

Oil prices inched up in early trade on Tuesday after Iran and Israel left the door open to a possible resumption of attacks on each other, though they had called a halt to hostilities following an appeal from US President Donald Trump. Brent crude futures rose 13 cents, or 0.14 percent, to $94.38 a barrel at 0001 GMT, while US West Texas Intermediate was up 11 cents, or 0.12 percent, at $91.41 a barrel.

Geopolitical Tensions

Prices climbed as much as 5 percent in the previous session after renewed Israeli strikes on Iran and attacks in Lebanon reduced hopes of an imminent end to the wider war, but pared gains after Iran’s armed forces announced the end of military operations against Israel. "While there is some relief from the latest pause in direct strikes, investors are not convinced the truce will hold," said Tim Waterer, chief market analyst at KCM Trade.

Supply Concerns

One of the key issues Washington is pressing Tehran for in peace talks is the reopening of the Strait of Hormuz, through which about a fifth of the world’s supply of oil passed before the US and Israel launched airstrikes on Iran at the end of February. On Monday, US forces disabled an unladen oil tanker in the Gulf of Oman after it attempted to sail to an Iranian port in violation of the ongoing blockade against Iran, the US military said.

Market Uncertainty

The market is pricing in continued uncertainty rather than a lasting resolution, Waterer added. "The key question is whether current de-escalation efforts can finally translate into a longer-lasting resolution, or if we’re simply in another temporary lull," Waterer said.

Outlook

Israeli Prime Minister Benjamin Netanyahu said in a video statement carried by Israeli television that Israel would respond with force if Iran attacked again. Tony Sycamore, market analyst at IG, noted that while the situation has stopped snowballing, the geopolitical backdrop remains tense, and a lasting peace deal remains elusive.

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