Oil prices gained more than 3% on Friday, with Brent crude futures rising $3.32, or 3.25%, to $109.04 a barrel by 0425 GMT, extending gains since the start of the war to about 50%. The latest surge builds on earlier gains, with Brent climbing nearly 6% and WTI jumping more than 7% for the week amid uncertainty regarding the fragile ceasefire in the Iran conflict. Trump stated in an interview aired on Thursday night on Fox News that "I am not going to be much more patient," adding that "they should make a deal." The market reaction follows Trump's earlier statement that he is running out of patience with Iran and has agreed with Chinese President Xi Jinping that Iran cannot be allowed to have a nuclear weapon and must reopen the Strait of Hormuz. As per Commerzbank analysts, "The tone between the U.S. and Iran has once again become significantly more confrontational. While the ceasefire holds, hopes for a swift reopening of the Strait of Hormuz have faded."
The U.S. and Chinese presidents continued their discussions in Beijing for a second day, with U.S. President Donald Trump and Chinese President Xi Jinping set to meet on Friday to wrap up a two-day state visit that has featured pomp and business deals. As reported by Bloomberg, Trump indicated he is losing patience with Iran and asserted that he and Xi Jinping agreed Tehran should not possess nuclear weapons and must reopen the Strait of Hormuz. US Trade Representative Jamieson Greer stated on Friday morning that China was being very pragmatic about involvement with Iran, emphasizing it was important to China to have the Strait of Hormuz open. Among deals the market was looking for from the summit, Trump said China wants to buy oil from the United States and he could lift sanctions on Chinese companies that buy Iranian oil. On his way back from China, Trump also told reporters he spoke with Xi about potentially lifting sanctions on Chinese oil companies that buy Iranian crude, saying "I'm going to make a decision over the next few days." Chinese Foreign Minister Wang Yi said Friday that the strait should be opened to shipping as soon as possible, according to state-run Xinhua News Agency. Iran's Foreign Minister Abbas Araqchi responded on Friday, saying Iran has "no trust" in the United States and is interested in negotiating only if Washington is serious, adding that Iran is prepared to go back to fighting but also prepared for diplomatic solutions.
Tensions escalated significantly as a ship anchored off the United Arab Emirates was seized and taken toward Iran and another cargo ship near Oman sank after being attacked, according to authorities. The United Kingdom Maritime Trade Operations center reported that the ship seized Thursday was taken by unauthorized personnel while anchored 38 nautical miles northeast of the UAE port of Fujairah, an important oil export terminal that has been repeatedly attacked during the war with Iran. Iran seized a number of ships, including a tanker identified as the Ocean Koi, last week, saying it was attempting to disrupt oil exports and Iranian interests, according to the official IRNA news agency. The U.S. sanctioned the Ocean Koi in February as part of a "shadow fleet" transporting Iranian oil. The top U.S. commander in the Middle East said Thursday he believes Iran's military capabilities have been "dramatically degraded," but its leaders are impacting shipping in the strait with rhetoric alone. "Their voice is very loud, and the threats are clearly heard by the merchant industry and the insurance industry," Adm. Brad Cooper told lawmakers in Congress. Shipping analytics firm Kpler reported on Thursday that 10 ships had sailed through the strait in the past 24 hours, compared with the five to seven that have crossed daily in recent weeks, though this remains far short of the 140 vessels that typically crossed daily before the war. Despite Tehran's claims that about 30 vessels had passed through the Strait of Hormuz, concerns persist over continued ship attacks and seizures.
Iran has made clear its position on the Strait of Hormuz, with Iran's senior vice president Mohammadreza Aref saying Thursday that the strait belongs to Iran and that Tehran would not give it up "at any price." Iran's judiciary spokesperson told the state-owned Iran Daily newspaper that Iran has the legal and judicial right to seize oil tankers in the strait that are connected to the U.S. because the U.S. has violated international maritime laws and committed piracy. Iran said it will not enter more talks with the United States unless five conditions are met, including paying reparations for the war and accepting Iran's sovereignty over the Strait of Hormuz, according to Iran's semiofficial Fars news agency. The White House is again unlikely to accept those demands, which would essentially formalize Iran's control over a waterway that was open to international traffic before the war. Iranian semiofficial news agencies reported that Chinese ships began passing through the strait Wednesday night under new Iranian protocols, with Tehran agreeing to facilitate the passage of several Chinese vessels after requests from China's foreign minister and Beijing's ambassador to Iran. Iran's highly enriched uranium, which has been in an unknown location since a US and Israeli bombing campaign in June last year, remains one of many obstacles to a peace agreement.
The escalating tensions have significant implications for global energy markets, with about a fifth of the world's oil and liquefied natural gas normally passing through the Strait of Hormuz, which serves as the gateway to the Gulf and main export route for countries such as Saudi Arabia, Iraq and Qatar. As per Bloomberg Economics defense lead Becca Wasser, "Negotiations are deadlocked, violence erupts sporadically and the economic costs of the prolonged closing of the Strait of Hormuz are rising. Threats to return to war continue to fly, and the status quo is becoming increasingly unsustainable. We think a return to open conflict is likely." PVM analyst Tamas Varga noted that "An increasing number of vessels are filtering through the strait ... although currently this has a more tangible impact on sentiment than on the actual oil balance." Price Futures Group senior analyst Phil Flynn warned that "The world has consumed its oil safety net at a historic rate. While strategic releases and demand reduction have prevented immediate chaos, the margin for error is shrinking rapidly. A prolonged closure of the Strait of Hormuz points toward tighter physical markets, potential refined product shortages, and upward pressure on prices in the coming weeks and months." Saxo Bank analyst Ole Hansen added that "Crude is trading higher on a combination of the Trump-Xi meeting doing little to bring us closer to a reopening of the Strait of Hormuz, and continued Ukrainian attacks on Russian refineries."
