Oil Jumps as Hormuz Crisis Deepens

Oil rose after President Donald Trump said a fragile ceasefire between the US and Iran is close to unraveling, prolonging the effective closure of the crucial Strait of Hormuz.

Brent futures advanced 2.9% to settle near $104 a barrel, the highest in almost a week. Axios reported that Trump is meeting with his national security team to discuss next steps in the Middle East conflict, including possibly resuming military action.

"I would say the ceasefire is on massive life support," Trump told reporters Monday at the White House.

Trump also said he is considering renewing "Project Freedom," aimed at guiding ships through Hormuz, according to Fox News. Traders interpreted a potential revival of the operation as low confidence among US camps that Iran will open the waterway soon.

The near-halt of traffic through Hormuz during the 10-week conflict has choked off shipments of crude, gas and fuels to global customers, driving up energy prices and raising inflation fears. Trump on Monday voiced support for a federal gasoline tax holiday to counter rising prices at the pump, which, if passed, would be its first national-level suspension in history.

The commodity surged in early trading after Trump rejected Iran's response over the weekend to a US peace proposal. In a social media post, the US leader said Tehran's response was "TOTALLY UNACCEPTABLE." Iran had demanded a lifting of Washington's naval blockade and sanctions relief, while maintaining some control over traffic through Hormuz, according to a person familiar with the matter.

"There'd been an expectation that some of the diplomatic channels were going to produce some more positive results," Emily Ashford, head of energy research at Standard Chartered, said in a Bloomberg Television interview. "We're still back in that stalemate situation and every day, every week that passes is more barrels lost."

Iranian Response

Iran's nuclear ambitions and the status of Hormuz are at the heart of negotiations with the US. Tehran offered to transfer some of its stockpile of highly enriched uranium to a third country, but rejected the idea of dismantling its nuclear facilities, the Wall Street Journal reported. Iran disputed the report, according to semi-official news agency Tasnim. Later in the day, a different state-run outlet wrote that nuclear technology is a non-negotiable.

While there has been a trickle of vessels transiting Hormuz — with the UAE and Saudi Arabia sneaking several tankers out and Qatar sending a shipment of liquefied natural gas — flows remain just a fraction of what they were before the war.

Iran shows no signs of loosening its grip on the key shipping lane. The country's state media reported deep-roaming submarines capable of firing anti-ship cruise missiles were deployed in the Strait. A drone strike Sunday that briefly set a cargo vessel ablaze off Qatar also showed shipping remains highly dangerous.

Oil Prices

• WTI for June delivery rose 2.8% to settle at $98.07 a barrel in New York
• Brent for July settlement climbed 2.9% to settle at $104.21 a barrel

Saudi Aramco Chief Executive Officer Amin Nasser said the oil market is losing 100 million barrels every week and that if the disruption continues into June, the market will only return to normal next year.

Wall Street is growing increasingly convinced that passage through Hormuz will remain impaired into the second half of the year. A majority of respondents to a Goldman Sachs Group Inc. survey expected flows through the strait to be disrupted beyond the end of June.

In an interview on CBS's 60 Minutes on Sunday, Israeli Prime Minister Benjamin Netanyahu warned that the war with Iran is "not over." He said there's more work needed to dismantle the country's nuclear capability and to remove its stockpile of highly enriched uranium.

Trump is scheduled to meet Chinese President Xi Jinping this week, and US officials said Sunday that he's expected to press his counterpart over China's approach to Iran. A group of more than a dozen top executives from major financial, technology, aerospace and agricultural firms is expected to join the delegation.