Oil Rises Again After Trump Rejects Iran Proposal; Brent at $103.89

Brent crude futures at $103 a barrel

Israel says conflict with Iran is not over

Oil prices resumed their climb on May 11 as Israel warned its conflict with Iran was not over and President Donald Trump rejected Tehran’s proposal to end the war with the US and Israel, stoking fears of disruptions to energy supplies.

Israeli Prime Minister Benjamin Netanyahu said the conflict with Iran was “not over yet.” Amid escalating tensions in the Middle East, July Brent crude futures, the international benchmark, rose 2.5% to $103.89 a barrel as of 12:40 p.m. in London. June West Texas Intermediate crude futures also gained 2.5% to $97.88 a barrel.

Trump rejected Iran’s proposal to end the war involving the US and Israel. “I just read Iran’s response from the so-called ‘delegation,’ and I don’t like it. It is totally unacceptable.”

In an interview with CBS’s “60 Minutes” that aired the previous night, Netanyahu said Iran still had nuclear material and enriched uranium that needed to be removed. He added that enrichment facilities still had to be dismantled, and pointed to Iran-backed proxy forces and ballistic missiles that Tehran was seeking to produce.

Asked how the US and Israel would remove the nuclear material, Netanyahu replied: “You go in and take it out.”

Citibank analysts wrote in a recent report that oil prices could climb further if Iran and the US fail to reach an agreement. High crude inventories, releases from strategic petroleum reserves, weaker demand from developing countries and signs of easing tensions in the Middle East have helped cushion the oil market, the analysts added.

Citibank said risks to oil prices remain tilted to the upside because Iran retains substantial control over the timing and conditions of any agreement to reopen the Strait of Hormuz.

The bank expects the two sides to reach an agreement around the end of May to reopen the strait, though delays or only a partial reopening could prolong the disruption.

Felipe Elink Schuurman, chief executive officer and co-founder of Sparta Commodities, compared current oil-market conditions to those during the 2020 pandemic.

Schuurman told CNBC on May 11 that global oil demand in 2020 fell by an average of 9 million barrels a day from 2019 levels, roughly matching the current scale of supply losses. The market will adjust, he said, and consumers will experience a comparable drop in demand.

“The question is where that demand destruction will occur,” he said. “Crude may not rise to $200 a barrel, but consumers could feel that kind of increase in the prices of the products they buy.” Poorer countries would face a humanitarian crisis, Europe an economic crisis and the US a political crisis, he said.

Kim Jung-a, Hankyung.com guest reporter kja@hankyung.com