Oil prices declined as President Donald Trump threatened to resume military strikes on Iran while markets faced mounting pressure from rising bond yields. According to Bloomberg, Trump stated that 'I was asked by Saudi Arabia, Qatar, UAE, and some others if we could put it off for two or three days, a short period of time, because they think that they are getting very close to making a deal.' However, he also warned that 'If we can't make a deal, we will be forced to resume strikes on Iran,' adding to market uncertainty. The threat comes as Treasury 30-year yields hit levels last seen in 2007, with concerns that elevated energy costs are increasing the chances that the next Federal Reserve move will be a hike, not a cut. The S&P 500 fell 0.7% as of 4 p.m. New York time, extending its drop from record highs amid speculation that a torrid market surge has gone too far.
Oil prices showed significant declines as Trump's postponement of military action provided relief to markets, though the commodity later retreated amid broader market pressures. As reported by Anadolu Agency, international benchmark Brent crude traded at $110.60 per barrel at 9.46 a.m. local time, down around 1.3% from the previous close of $112.10. US benchmark West Texas Intermediate (WTI) decreased about 0.6% to $103.74 per barrel, compared with $104.38 in the previous session. However, West Texas Intermediate crude fell 0.8% to $107.77 a barrel as of the latest reports, reflecting renewed market volatility. The commodity had previously declined on news that NATO is discussing the possibility of helping ships pass through the Strait of Hormuz if the vital energy shipping route isn't reopened by early July, with investors increasingly pricing in a closure lasting beyond July.
The conflict, now in its 12th week, has severely curtailed shipping through the Strait of Hormuz, the strategic chokepoint that normally carries roughly a fifth of global crude supply. According to Bloomberg, a US naval blockade of Iranian ports has left Iran's Kharg Island oil terminal idle for at least 10 days, cutting off Tehran's petroleum revenues and withdrawing millions of barrels from the market. That represents a reversal for the Islamic Republic, which had been the strait's dominant crude exporter after barring other nations' vessels. The developments have eased concerns over potential supply disruptions in the Middle East and raised expectations of additional crude supplies entering the market. Some 23 tankers were spotted around Iran's Kharg Island oil-export hub, the largest cluster since the start of the US blockade a month ago. US Central Command said it has 'redirected' 85 commercial vessels since the start of the blockade against Iranian ports.
The latest bout of weakness in bonds lifted yields to multi-year highs, reducing appetite for stocks amid speculation that a torrid market surge has gone too far. The yield on 10-year Treasuries advanced seven basis points to 4.66%, while the yield on 30-year Treasuries advanced five basis points to 5.18%, hitting levels last seen in 2007. According to Bloomberg, the jump in Treasury yields is squeezing compensation for equity risk across major US benchmarks, further dimming the appeal of stocks. The S&P 500 posted its longest losing streak since the end of March, with fund managers increasing their stock allocations by the most on record according to a Bank of America Corp. survey. Their exposure came close to triggering a 'sell signal,' with 73% respondents long on semiconductor stocks identified as the most-crowded trade.
Support for oil prices continues to come from signs of tightening US supplies, while US Treasury Secretary Scott Bessent announced a 30-day extension of sanctions waiver allowing countries facing energy shortages due to the Iran conflict to purchase Russian oil. According to The Wall Street Journal, industry data showed crude inventories fell by 9.1 million barrels last week, which, if confirmed by official figures, would mark the largest drawdown since September. This domestic supply constraint adds to the geopolitical risk premium currently embedded in crude markets as traders weigh the potential for renewed hostilities in the Middle East. The Treasury Department also said it's extending the sanctions waiver to allow Russian oil sales for another 30 days, with Treasury Secretary Scott Bessent calling on the G-7 nations and others to increase sanctions on Iran as the conflict drags on without an end in sight.
