- Trump says there is no rush to reach an agreement with Iran, the US blockade remains.
- Washington cites progress in efforts to resolve the conflict with Iran.
- Brent and WTI hit lowest levels since May 7 earlier in the session.
Oil prices hit two-week lows on Monday on optimism that the United States and Iran were moving closer to a peace deal, although they remained divided on key issues, including blockades in the Strait of Hormuz that continued to restrict Middle East oil supplies.
Brent crude fell $4.71, or 4.55%, to $98.83 a barrel, while U.S. West Texas Intermediate fell $4.57, or 4.73%, to $92.03 a barrel.
Both contracts hit their lowest levels since May 7 earlier in the session.
On Saturday, US President Donald Trump said Washington and Iran had “largely negotiated” a memorandum of understanding on a peace deal that would reopen the Strait of Hormuz, which, before the conflict, handled about a fifth of global oil and liquefied natural gas shipments.
However, the two sides remain at odds on several major issues, and Trump said Sunday that he had told his representatives not to rush into any deal with Iran.
MST Marquee analyst Saul Kavonic said: “Despite all the warnings and risks remaining for the peace deal and the Strait of Hormuz, there is now some light at the end of the tunnel, which will bring some relief to the oil price in the short term.”
However, analysts expect it will take months for oil flows through the strait to normalize and damaged oil and gas facilities to be repaired.
Meanwhile, the euro rose 0.37% to $1.1646, while the Japanese yen strengthened to 158.85 per US dollar in early trading as the safe-haven dollar gave up some of its recent gains.
Nasdaq futures rose 0.89% and S&P futures rose 0.6%.
Nick Twidale, chief market analyst at ATFX Global, expects the market to accept more risk on Monday, but not increase until there is confirmation that the Strait of Hormuz will reopen.
“We will need to reach an agreement in the coming sessions, as we know there are still some major sticking points,” he said.
Japan’s Nikkei was set for a strong start to Monday’s session.
The most important question for financial markets is when the Strait of Hormuz will reopen, Commonwealth Bank of Australia strategists said in a note.
“Under what conditions will the Strait be reopened and how long will it take to repair production facilities and infrastructure to increase production of energy and other goods to pre-war levels,” they said.
