Oil prices surged by more than $6 per barrel on Monday, June 1 after reports emerged that Iran’s negotiating team had halted communications with the United States and that Tehran-backed groups were considering measures to block key global shipping routes, including the Strait of Hormuz.
According to Iran’s Tasnim news agency, discussions between Iran and the United States have stalled, while allied groups within the so-called “Resistance Front” are weighing actions that could disrupt maritime traffic through the Strait of Hormuz and the Bab el-Mandeb Strait two of the world’s most critical energy transit corridors.
The report intensified concerns over global oil supplies, sending Brent crude futures up $6.02, or 6.6%, to $97.14 a barrel by mid-morning trading. U.S. West Texas Intermediate (WTI) crude futures also gained $6.68, or 7.7%, to $94.04 a barrel.
The latest rally comes after both benchmark contracts recorded steep losses in May, with Brent and WTI declining by about 19% and 17%, respectively. The monthly drop marked their biggest decline in absolute terms since March 2020, when the COVID-19 pandemic severely curtailed global energy demand.
Market sentiment was further shaken by renewed hostilities in the Middle East. The escalation followed recent exchanges between Iran and the United States and Israel’s decision to deploy additional troops into Lebanon amid its ongoing conflict with the Iran-backed Hezbollah militant group.
The renewed fighting has also dimmed hopes for a diplomatic breakthrough between Washington and Tehran. Expectations had been growing that the two sides could extend a ceasefire arrangement announced earlier this year, particularly after the United States hosted Israel-Lebanon peace talks on Friday.
U.S. President Donald Trump said on Friday that he would soon decide on a proposed extension of the ceasefire. However, Iran has maintained that any agreement must include both Hezbollah and Lebanon, while Washington has reportedly proposed a gradual de-escalation framework.
Analysts say concerns over the security of the Strait of Hormuz—a vital route for global oil and gas shipments—are driving the latest price gains. IG market analyst Tony Sycamore noted that even if a diplomatic agreement is reached, it is unlikely to result in a significant increase in oil supply.
Reports have also emerged suggesting that Iran may have increased the deployment of naval mines in the Strait of Hormuz, adding to concerns about potential disruptions to global energy markets.
Meanwhile, Iran’s Foreign Ministry spokesperson, Esmaeil Baghaei, attributed delays in diplomatic efforts to a lack of trust between the parties, conflicting positions from Washington and continued Israeli military actions in Lebanon.
Despite signs of weakening demand from China, where recent economic data pointed to slowing factory activity, supply concerns continued to dominate market sentiment.
Additional support for oil prices came from expectations that Saudi Arabia could lower its official selling prices for crude exports to Asia in July for a second consecutive month, while Russia is reportedly considering tighter controls on fuel exports to safeguard domestic supplies.
Looking ahead, analysts at Goldman Sachs warned that weak oil demand in China and Europe poses a downside risk to crude prices later in the year. However, they noted that any further escalation in the Middle East could continue to support higher prices by threatening global supply flows.
Source: Reuters
