Brent crude has surged more than 7 percent in two days to above $106 a barrel as the prospect of a quick diplomatic resolution to the US-Iran conflict faded, raising fresh concerns over global oil supplies.
As at 9:35am WAT on Thursday, Brent crude was trading at $106.30 per barrel, up 3.10 percent, while West Texas Intermediate (WTI) stood at $94.64, gaining 2.69 percent.
The latest increase extends a sharp rally from Wednesday, when Brent settled 3.86 percent higher at $103.08 per barrel and WTI gained 1.81 percent to $92.16.
The renewed buying followed Iranian President Masoud Pezeshkian’s warning at the United Nations that Tehran would not surrender to US pressure, alongside growing uncertainty over whether indirect negotiations between Washington and Tehran can end the conflict.
Pezeshkian told the UN General Assembly on Wednesday that Iran remained open to diplomacy but would not negotiate under military pressure or coercion.
His position came a day after US President Donald Trump warned that he could “annihilate” Iran if an agreement to end the conflict could not be reached.
A senior Iranian official subsequently told Reuters that Tehran was reviewing Washington’s response to its proposals for ending hostilities, but significant differences remained between the two sides. The discussions have included the possible reopening of the Strait of Hormuz and the lifting of a US naval blockade on Iranian ports.
The uncertainty has kept Hormuz at the centre of the oil market’s supply concerns.
The strategically important waterway handles roughly one-fifth of global oil and liquefied natural gas shipments under normal conditions. Iran has previously indicated that it could reopen the strait if the United States eases military pressure and lifts its blockade of Iranian ports.
Iranian security chief Mohsen Rezaei, however, said the waterway would not reopen until Tehran’s conditions were met, further reducing expectations of an immediate restoration of normal Gulf shipping.
Shipping activity through the strait has already fallen sharply. Preliminary data reported by Reuters showed only two commodity vessels crossed Hormuz on Monday, compared with a pre-conflict average of about 125 large commercial vessels a day.
The market had earlier received some relief from signs of improving regional supply. Saudi Arabia reportedly resumed operations on its East-West pipeline to the Red Sea, while Iraq increased exports, developments that had raised expectations that some Gulf supplies could bypass the disruption around Hormuz.
Those expectations have now been overshadowed by renewed uncertainty over the diplomatic process.
The increase in crude prices is also adding to concerns over inflation and monetary policy. The return of Brent above $100 a barrel, alongside firm US business activity data, has strengthened expectations that central banks could maintain or resume tighter policy if higher energy costs feed into broader inflation.
Meanwhile, US crude inventories rose by about 3 million barrels in the week ended September 18 to 426.4 million barrels, according to the US Energy Information Administration.
The increase was contrary to analysts’ expectations for a drawdown. Gasoline inventories declined by 1.7 million barrels, while distillate stocks, including diesel and heating oil, fell by 400,000 barrels.
The oil market is also assessing the potential impact of proposed restrictions on US diesel exports.
Reports that the White House was considering a 90-day ban on diesel exports pushed US ultra-low-sulfur diesel futures sharply lower on Wednesday. The White House later denied that such a ban was being prepared, although Bloomberg subsequently reported that Energy Secretary Chris Wright had warned oil industry executives to prepare for possible restrictions.
US officials and market analysts have questioned whether an export ban would lower domestic energy prices, with concerns that restricting exports could instead tighten global diesel supplies.
For crude markets, however, the immediate focus remains on the US-Iran conflict, the status of diplomatic contacts and the possibility of restoring normal traffic through the Strait of Hormuz.
Until there is clearer progress on those issues, the threat of further disruption to one of the world’s most important oil shipping routes is likely to remain a major driver of crude price movements.