Oil Rebounds as Trump Warning on Iran Revives Uncertainty Over US-Iran Talks

International oil prices rose after President Donald Trump warned of possible military action against Iran.

Bloomberg reported on June 21 that Brent crude climbed as much as 2.2% intraday to $82.30 a barrel, while West Texas Intermediate traded near $77 a barrel.

Oil rebounded as uncertainty grew over high-level talks between the US and Iran in Switzerland. Trump had earlier warned that additional attacks could follow if Iran failed to restrain Hezbollah, the Lebanese militant group. Some Iranian media later reported that the talks had been suspended, but Bloomberg said negotiations were still under way.

The market is treating the outcome of the talks as a key factor in determining whether Middle East oil supplies can return to normal. Resolving the conflict in Lebanon has emerged as a major sticking point in reaching an agreement.

The US and Iran are now in a 60-day final negotiating process based on a memorandum of understanding signed last week. If the talks conclude successfully, the Strait of Hormuz could fully reopen and Iranian oil exports could normalize.

Bloomberg said a full reopening of the Strait of Hormuz could bring an additional 80 million barrels of crude into the market. With Chinese oil demand still weakening, that supply increase could add downward pressure on prices.

Meanwhile, Gulf oil producers appear to be preparing to raise output. Kuwait has withdrawn its force majeure measures, and Abu Dhabi National Oil Co. has asked customers to resume shipments in the Persian Gulf.