(Bloomberg) – Oil surged as traders reacted to an Iranian report that the country will stop exchanging messages with the U.S. over Israel.
Brent climbed as high as $96.10 a barrel, while West Texas Intermediate was above $92. Iran’s semi-official Tasnim news agency reported the halt of exchanges in protest at Israel’s escalation in Lebanon.
The move is a sign of increased tension between Washington and Tehran, which have been trading messages seeking changes to a draft agreement that would extend a ceasefire and restart Persian Gulf energy exports via the Strait of Hormuz.
Overnight, President Donald Trump said “it will all work out well in the end,” despite recent strikes by both sides. But Iran said that a truce in Lebanon—where Israel has expanded its ground assault—would be integral to any deal, and accused the U.S. of dragging out negotiations.
Crude retreated last week, reflecting gathering hopes that some form of agreement could be reached and that energy flows would resume through Hormuz. The dramatic slowdown in shipping through the vital waterway has driven up Brent futures by more than 30% since the war started at the end of February.
“We should not be under the illusion that the current negotiations are peace talks,” said Tamas Varga, an analyst at brokerage PVM. “They are laying the groundwork for an extension of the ceasefire, during which the crucial issues will be discussed.”
Elsewhere, Ukraine’s attacks on Russian oil refineries set a record in May. Moscow has banned exports of jet fuel through November to avoid shortages.
