Crude oil prices rose Monday after Iran and the U.S. ruled out an extension of the memorandum of understanding that they signed in June to end the conflict.
A senior Iranian official told Reuters, meawhile, that Tehran would shift to offense rather than relying on defense if diplomacy with the U.S. fails.
U.S. crude oil futures rose 2.6% to close at $84.50 per barrel. Brent crude, the international benchmark, gained 2.7% to settle at $90.87.
“Iranian entities must be prepared to escalate tensions in the Strait of Hormuz and wider region, as Iran will be ready to make decisions and take action on difficult decisions,” the Iranian official told Reuters.
The U.S. and Iran agreed to a memorandum of understanding on June 17 that was supposed to open the Strait of Hormuz while they negotiated a final deal on Tehran’s nuclear program within 60 days. The two-month deadline to reach a deal expires Monday.
Iran’s Foreign Ministry spokesman, Esmail Baghaei, ruled out talks to extend the MOU, according to the state news agency Tasnim.
“We did not start any negotiations at all, and the U.S. violated the understanding from the very beginning; therefore, the 60-day issue is not relevant,” Baghaei said, according to Tasnim.
President Donald Trump, meanwhile, demanded Iran “put up the white flag of surrender” in an interview with Fox News. Trump threatened to bomb Oman, a U.S. ally, for negotiating with Tehran over how to manage traffic in Hormuz.
“If Oman gets in the way, we’ll bomb the sh— out of them,” Trump told Fox.
The president later told reporters in the Oval Office that he would not seek to extend the ceasefire with Iran
Ship traffic through Hormuz was at a near standstill on Sunday, with just three vessels crossing the strait, according to data provided by Kpler. The five-day average for ship crossings stood at 12.
About 130 vessels transited before the war started on Feb. 28.
Brent prices will likely rise back toward $100 per barrel as China increases its imports, said Bob McNally, president of Rapidan Energy.
China has slashed its imports by 4 million barrels per day to 5 million barrels per day, which has played a key role in keeping crude prices from surging higher during the Iran war, McNally told CNBC.
But Beijing will likely allow its refiners to import more so they can benefit from high refined product prices, he said.
“China coming off of its crash diet is is not consistent with Brent prices being stable,” the analyst said.
