Oil prices traded mixed on Tuesday as investors weighed ongoing U.S.-Iran negotiations against the backdrop of fresh U.S. military operations in southern Iran, which underscored the fragility of the situation in the Middle East [1][2]. The U.S. military confirmed it conducted operations targeting vessels allegedly attempting to deploy mines and missile launch locations in southern Iran, with U.S. Central Command stating the actions were intended 'to protect our troops from threats posed by Iranian forces' [1][2]. CENTCOM spokesman Tim Hawkins told CNBC that the targets included missile launch sites and Iranian boats attempting to emplace mines [2].
Brent crude July futures gained 1.6% to $97.72 a barrel in Asia trading, while U.S. West Texas Intermediate (WTI) futures for June traded 5.4% lower at $91.38 per barrel, according to one source [1]. However, another source reported Brent and WTI futures at $96.14 and $90.30 per barrel, respectively, highlighting a discrepancy in price data [2]. Despite the military escalation, oil prices continued to fall, providing some relief for energy markets [2].
U.S. President Donald Trump stated that negotiations with Iran were 'proceeding nicely,' but cautioned that the U.S. could resume military action if discussions were to collapse, emphasizing, 'It will only be a Great Deal for all or, no Deal at all' [1][2]. Trump also linked the Iran peace deal to Arab countries signing the Abraham Accords, an agreement to normalize relations with Israel [1][2]. Pakistan rejected this linkage, stating the two issues 'are not interlinked and cannot be made so,' while Saudi Arabia said it would not sign the accords unless there is a pathway to Palestinian statehood [2].
UBS reported that global oil inventories dropped by a combined 246 million barrels in March and April, with cumulative production losses potentially exceeding 1 billion barrels by the end of May, indicating the market remains 'strongly undersupplied' [1]. Despite this, U.S. equity market futures rose, with all three major indexes advancing about 1% as markets reopened after the Memorial Day weekend [2].
Ex-CIA director David Petraeus suggested Iran could be 'blinking' over the Strait of Hormuz, a key flashpoint in the conflict [2]. However, the timing of any deal remains unclear, and Trump's new demands regarding the Abraham Accords have introduced further uncertainty into the negotiations [2].
CONCLUSION
The combination of U.S. military action in Iran and mixed signals from ongoing negotiations has left oil markets volatile and investors cautious. While oil inventories remain tight and geopolitical risks are elevated, the lack of clarity on a potential deal and new diplomatic hurdles continue to cloud the outlook for both energy and equity markets.