Market News

(Bloomberg) -- Oil prices rose after President Donald Trump threatened attacks on Iran’s energy infrastructure, overshadowing his comments that a deal to end hostilities in the Middle East could be close.

Brent futures were volatile after the president’s post on his Truth Social account, and were trading near $112 a barrel. The contract’s Tuesday expiry further exacerbated thin liquidity, as traders increasingly stay on the sidelines to avoid extreme headline-driven price swings.

West Texas Intermedate futures rose nearly 3% to trade near $102 a barrel while the most active June Brent futures climbed to trade near $108 a barrel.

If a deal is not reached shortly and “if the Hormuz Strait is not immediately ‘Open for Business,’ we will conclude our lovely ‘stay’ in Iran by blowing up and completely obliterating all of their Electric Generating Plants, Oil Wells and Kharg Island,” Trump said in the post.

Crude rose earlier in the session after more US troops arrived in the region and the Iran-backed Houthi militants in Yemen entered the war. So far the conflict has all-but blocked the Strait of Hormuz, and traders are warning that an even bigger increase in energy prices is on the way if the conflict doesn’t end soon.

Brent has surged around 60% in March as the war between the US, Israel and Iran upended global markets and triggered concern about a simultaneous spike in inflation and slowdown in growth. The conflict has entered its fifth week and is showing no sign of abating despite a diplomatic push by Washington last week and separate peace talks over the weekend in Pakistan.

Market disruption is centered on the Strait of Hormuz, through which about a fifth of the world’s oil flows in normal times. The conflict has also sent shockwaves across the global market as fuel prices soar.

“Four weeks in, the impact of the effective Hormuz closure is now spreading through the oil market,” Morgan Stanley analysts including Martijn Rats and Charlotte Firkins said. “The cumulative losses are now large enough to matter in end-use markets.”

On Sunday, Trump told reporters on Air Force One that Iran “gave” the US most of the 15 demands it sent to Tehran for an end to the war, declining to specify the concessions offered. Iran previously publicly rejected the plan, countering with conditions including maintaining sovereignty over the Strait of Hormuz.

Iran has choked off all but a fraction of the traffic passing through the waterway that links the Persian Gulf to global markets. Tehran has moved to formalize its control of the artery, barring most vessels, while allowing a handful to pass, including from Pakistan, Thailand and Malaysia. In a symbolically significant move, two state-owned Chinese container ships were trying to exit Hormuz on Monday.