(Bloomberg) — Oil fluctuated as traders parsed comments from President Donald Trump on the conflict between Israel and Iran, with the market on edge about potential crude supply disruptions in the Middle East.
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Brent added as much as 2.2% in a choppy session in which prices switched between gains and losses. A gauge of market volatility is the highest since 2022.
Trump said on Tuesday that he had not reached out to Iran for peace talks in “any way, shape, or form,” but that “if they want to talk, they know how to reach me.”
In a social media post on Monday evening, Trump warned residents of Tehran to evacuate. He later told reporters aboard Air Force One, flying back early from the Group of Seven summit in Canada, that he wanted Tehran’s nuclear program “wiped out,” according to CBS.
So far, Iran’s crude-exporting infrastructure has been spared, and most of the fallout has been confined to shipping.
Still, an incident in which two oil tankers collided near the Strait of Hormuz was a reminder of the risks to energy flows in the region.
Navigation signals in the Strait of Hormuz and the Persian Gulf are facing increasing interference that’s impacting positional reporting, according to the UK Navy, and some shipowners are reluctant to accept bookings in the region, citing safety concerns.
The market remains focused on the Strait of Hormuz and any sign that Tehran may seek to disrupt crude flows across the waterway, through which about a fifth of the world’s daily output passes. A blaze spotted in waters near the area on Tuesday is not security related, according to a maritime risk firm.
Oil prices still remain significantly higher than where they were before the attacks began, which prompted record volumes of producer hedging as well as futures and options changing hands. Morgan Stanley has hiked its price forecasts, citing increased risk from the conflict.
“It’s a jittery market but still not pricing in the worst-case scenarios on supply disruption,” said Vandana Hari, the founder of Vanda Insights in Singapore. “There could well be bigger strikes ahead, but that is still not changing the market’s calculus on supply risk.”
Israel said it’s taken control over much of Iran’s airspace and severely damaged key facilities used in its missile and nuclear programs since the assault was launched on Friday, sparking fears of widening conflict in a region that produces around a third of the world’s crude.