Oil prices extended their sharp rally on Tuesday as hopes of a quick resolution to the crisis around the Strait of Hormuz continued to fade. The renewed uncertainty has pushed crude prices higher, raising fresh concerns about inflation and increasing speculation that the United States Federal Reserve could keep interest rates higher for longer. Oil has gained about 10 per cent over the past week as tensions between the United States and Iran show little sign of easing.
The latest setback came after US President Donald Trump said he would seek compensation from Iran as part of any peace negotiations. His comments followed Tehran’s demand for US war reparations before agreeing to a resolution. The growing demands from both sides have made an immediate deal over the strategically important waterway appear increasingly difficult, keeping traders on edge and adding further support to crude prices.
Both major oil benchmarks jumped about five per cent on Monday before extending their gains by more than one per cent on Tuesday. West Texas Intermediate rose 1.5 per cent to $83.37 per barrel, while Brent crude climbed 1.3 per cent to $88.85 per barrel. Analysts say the lack of encouraging news on negotiations to reopen the Strait of Hormuz, a critical route for global oil supplies, is continuing to put upward pressure on prices.
The prolonged rise in crude prices could also create a difficult situation for central banks, particularly the US Federal Reserve. Although a surprise loss of more than 20,000 US jobs last month had eased expectations of further rate increases, higher energy costs could reignite inflationary pressure. Traders are now watching closely for the release of US consumer price data, which could provide important clues about the Fed’s next interest-rate decision.
For oil markets, the standoff between Washington and Tehran has become a high-stakes battle with economic consequences far beyond the Middle East. With negotiations showing little progress and the Strait of Hormuz remaining a major point of uncertainty, crude prices could stay elevated in the near term. Investors and consumers will be watching closely, as another sustained jump in oil prices could eventually translate into higher transport, energy and living costs worldwide.
source: punch
