Oil prices retreated on Friday following reports of a new Iranian proposal for peace negotiations, with Brent crude futures for July settling at $108.17, down $2.23 a barrel, or 2.02%, and West Texas Intermediate futures finishing at $101.94 a barrel, down $3.13, or 2.98%, according to Reuters. The decline came after crude oil had reached $126.41 per barrel on Thursday, marking the highest level since March 2022 before ending the session down. Both benchmarks remain on track for a 2.95% weekly gain despite the recent pullback, as the unresolved conflict and blockade of oil exports from the Persian Gulf continue to support prices. Markets are closed in many nations — including China, Singapore, Germany, France and Brazil — for Labor Day, contributing to thin trading volumes and heightened price volatility.
Iran sent its latest proposal for negotiations with the United States to Pakistani mediators on Thursday, state news agency IRNA reported on Friday, a move that could improve prospects for breaking an impasse in efforts to end the Iran war, as reported by Reuters. Phil Flynn, senior analyst with Price Futures Group, said "This Iran proposal has given hope to the market that there is an off-ramp for the United States." However, a ceasefire has been in place since April 8, but UAE presidential adviser Anwar Gargash said on Friday Tehran could not be trusted over any unilateral arrangements it makes for the Strait of Hormuz, in a sign of deep mistrust on all sides. A senior official of Iran's Revolutionary Guards had threatened on Thursday "long and painful strikes" on U.S. positions if Washington renewed attacks on Iran, pushing oil prices to intraday peaks before retreating.
Trump has in recent days told top advisers he wants the US blockade of Iranian ports to continue, with his team reportedly laying the groundwork for a longer-term strategy that could include keeping the Strait of Hormuz effectively closed. Trump told Axios in a phone interview on Wednesday that 'the blockade is somewhat more effective than the bombing. They are choking like a stuffed pig. And it is going to be worse for them. They can't have a nuclear weapon,' as reported by CNN. Trump is pursuing a strategy to maximise economic pressure on Iran to force it back to negotiations over its nuclear programme, while avoiding an immediate return to large-scale military strikes, according to CNN, citing people familiar with the matter. However, Reuters reports that Washington did not immediately announce any details of its plans for a series of fresh military strikes on Iran to compel it to negotiate an end to the conflict, with the U.S. President scheduled to receive a briefing on Thursday on such plans.
At the heart of the crisis lies the Strait of Hormuz, a critical chokepoint through which nearly one-fifth of the world's oil and LNG supplies pass, as reported by ABP Live Business. Tensions have effectively choked shipping through the Strait of Hormuz since US and Israeli air strikes on Iran began on February 28, with Iran having largely restricted shipping through the strait, allowing only its own vessels. In response, the US has stepped up its blockade of Iranian ships this month, keeping markets on edge. Despite some vessels reportedly crossing blockade lines, the overall flow remains heavily constrained, as noted by The Times of India. The stalemate over peace talks and continuing blockade of the Strait of Hormuz has crippled global energy supplies, with the strait having traditionally been a channel for about 20% of global oil and gas trade. The disruption has triggered one of the most severe global energy shocks in recent years, with analysts describing it as one of the largest disruptions to global energy supplies.
ConocoPhillips is warning of imminent 'critical shortages' of oil for some nations as the war enters its third month, with Chief Financial Officer Andy O'Brien telling analysts during a conference call on Thursday that the supply pinch appears likely to significantly worsen as soon as June, as reported by Bloomberg. 'The markets sort of had a bit of a grace period initially when the tankers that left the Persian Gulf in late-February were still on the water; now all of those have reached their destination,' O'Brien said. 'We are going to start to see some import-dependent countries potentially start to face critical shortages as we get into the June-July time-frame.' The gap between paper and physical prices is narrowing as tangible domestic tightness begins to materialize for the first time since the war began, with US crude exports surging to a record last week as global buyers tapped American producers for barrels to replace lost supply from the Middle East. Chevron Corp. CEO Mike Wirth told CNBC that the company is worried about global oil supplies running dry, and the threat to fuel demand, stating 'The global energy system continues to be under extreme stress.'
