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Oil prices rebound as risks escalate
Oil prices rose at the start of trading on Monday after renewed military developments between the United States and Iran revived geopolitical concerns, dampening some of the optimism surrounding the possibility of reaching an agreement to ease tensions in the region. Brent crude, the global benchmark, climbed by about 2.8% to $93.63 a barrel, while US West Texas Intermediate crude rose by 3.4% to $90.29 a barrel.
This rise comes after a volatile month, with Brent crude falling by about 19% in May, its biggest monthly drop since March 2020. Military confrontations are reigniting market concerns, and oil’s gains followed a military exchange between Washington and Tehran over the weekend, after the US Central Command announced it had carried out strikes targeting radar sites and drone control facilities inside Iran, following Tehran’s downing of a US drone.
In a development that heightened regional concerns, the Kuwaiti military announced Monday morning that the country had been attacked by missiles and drones, without identifying the perpetrators. These events have revived fears regarding the security of oil supplies in the Middle East, a region vital to global energy supplies. Despite the military escalation, US President Donald Trump asserted that the possibility of reaching an agreement with Iran remains.
Trump said in a post on Truth Social that Iran “really wants to make a deal,” adding that any potential agreement would be beneficial to the United States and its allies.
The US president had previously stated in a post that any settlement under discussion requires Iran to commit to not possessing a nuclear weapon, which remains one of the most prominent points of contention in the ongoing negotiations.
Markets caught between escalation and hopes for de-escalation
Despite the positive political statements, the markets preferred to focus on developments on the ground rather than diplomatic rhetoric, which contributed to the continued rise in oil prices.
Investors are closely monitoring the future of Iranian oil exports and the prospects for their wider return to global markets in the coming period, as they are an influential element in the supply and demand equation.
Will Iranian oil return to the markets?
Analysts believe the question is no longer whether Iranian oil will return to global markets, but rather how and how quickly that return will occur. Norbert Rücker, head of economics at Julius Baer Bank, pointed out that the continued stalemate in negotiations between the United States and Iran does not negate the important fact that the region has not yet descended into a full-blown confrontation, which can be considered a relatively reassuring factor for the markets.
With military tensions continuing alongside diplomatic efforts, oil remains caught between two opposing scenarios: an escalation that could threaten supplies and raise prices even further, or a political breakthrough that could bring some Iranian oil back to the market and change the global energy balance in the coming months.
