Brent crude futures rose more than 2% on Tuesday after the U.S. military carried out strikes in Iran, keeping markets on edge as a deal to end the war and open up the Strait of Hormuz remained elusive.
Brent futures LCOc1 were up $2.36, or 2.5%, to $98.50 a barrel as of 0630 GMT, after settling 7% lower in the previous session.
U.S. West Texas Intermediate crude CLc1 was at $91.95 a barrel, up slightly from Monday's last traded price but down $4.65, or 4.8%, from Friday's close. There was no settlement on Monday due to the U.S. Memorial Day holiday.
While both contracts fell during the overnight session on hopes of a peace deal, the U.S. strikes in southern Iran and Israeli attacks on Hezbollah have boosted Brent prices and widened the spread with WTI, said Michael McCarthy, CEO of online trading platform Moomoo Australia.
U.S. Secretary of State Marco Rubio said on Tuesday that negotiating a deal with Iran could "take a few days," quashing hopes for an imminent end to the conflict a day after U.S. forces conducted what Washington called defensive strikes in southern Iran.
Tehran has effectively halted nearly all non-Iranian shipping into and out of the Gulf via the Strait of Hormuz since the war began, choking off about a fifth of global oil and liquefied natural gas flows.
The strikes happened as Iran's top negotiator and its foreign minister were in Doha for talks with Qatar's prime minister on a potential deal with the U.S. to end the three-month-old war.
Both Washington and Tehran said they have made progress on a memorandum of understanding that would halt the war and give negotiators 60 days to reach a final deal.
Nikkei reported, citing a Middle East diplomatic source, that Iran would clear mines from the strait within a 30‑day window under the agreement, after which vessels from all countries could navigate freely and safely, with Tehran also ending transit fee collection.
"Traders are betting heavily that a breakthrough will finally free up the long-paralyzed tankers stuck in and around the Strait of Hormuz," said Tim Waterer, chief market analyst at KCM Trade.
Ship-tracking data showed that three liquefied natural gas tankers passed through the strait in recent days, heading to Pakistan, China and India, along with a supertanker carrying Iraqi crude to China that had been stranded for nearly three months.
U.S. President Donald Trump on Monday repeated his demand that Iran hand over its enriched uranium so it could be destroyed.
"It's a sharp reminder that the deal could still collapse at the eleventh hour, much like the five previous attempts before it," said Tony Sycamore, a market analyst at IG.
(Reuters - Reporting by Pooja Menon in Bengaluru and Emily Chow in Singapore; Editing by Shri Navaratnam, John Mair and Jamie Freed)
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