Trump sees great Iran deal as 1 waterway remains blocked

(P1) President Donald Trump asserted the US is in a “very good position” to strike a “great deal” with Iran, even as the administration’s naval blockade keeps the Strait of Hormuz at a virtual standstill. Trump’s comments create significant uncertainty for global markets, which are weighing the prospect of a diplomatic resolution against the escalating risk of a wider conflict that could spike oil prices.

(P2) "The closure of the Strait is completely untenable for the global economy," Arjun Murti, a partner at Veriten and a longtime energy markets analyst, told World Oil. "The market has been operating under the view that the Strait is about to imminently re-open... So far, that has not proven correct."

(P3) The mixed signals have whipsawed energy markets. Brent crude jumped 5.97% to $95.78 a barrel and West Texas Intermediate rose 6.4% to $89.27 after the US seized an Iranian-linked tanker, the Touska, and Iran confirmed the strait would remain closed. The move reversed a sharp drop from late last week when Trump prematurely announced the waterway was "fully open," a claim Iran quickly refuted. Shipping traffic through the strait, which handles 20% of global oil, has plunged 95% since the conflict began.

(P4) With a fragile two-week ceasefire set to expire Wednesday, the standoff threatens to trigger a global energy crisis. Rystad Energy warned a prolonged conflict could create a cumulative supply shortfall of 1.8 billion barrels this year. The disruption has already added over $100 to long-haul flight costs from Europe, a tangible sign of the economic stakes as negotiators weigh their next moves.

Talks in Doubt as Ceasefire Deadline Looms

Prospects for a second round of peace talks in Islamabad remain murky. President Trump stated a US delegation led by Vice President JD Vance would travel to Pakistan, but Iranian officials have denied any plans to send negotiators, accusing the US of “armed piracy” following the seizure of the Touska.

"We see the current negotiations as a continuation of the battlefield," Ebrahim Azizi, head of the Iranian parliament’s National Security Committee, told Al Jazeera.

The diplomatic impasse stems from the US withdrawal from the Joint Comprehensive Plan of Action (JCPOA) in 2018. Key sticking points in the current crisis include the US demand for Iran to halt its uranium enrichment program and Iran's insistence on the lifting of the US naval blockade and an end to Israeli military actions in Lebanon.

Markets Confront Geopolitical Risk

Analysts caution that the market is underpricing the risk of a sustained disruption. The seizure of the Touska in the Gulf of Oman widens the geographic area considered risky for transit, and shipping firms are adopting a "wait and see" approach, leaving hundreds of vessels stranded.

"The idea that there will be a clean ‘open’ or ‘closed’ may be what the market is most getting wrong now,” Murti said, suggesting intermittent disruptions could become the norm.

For now, Trump maintains that the blockade is a "great success" and that the US has "complete control" of the strait. However, with Iran vowing to retaliate and the ceasefire deadline hours away, traders are bracing for more volatility.

This article is for informational purposes only and does not constitute investment advice.