UPDATED 10:20 EST, MONDAY JUNE 1ST: Oil prices exploded higher Monday, with U.S. crude leaping more than 7% after Iran’s state-affiliated media reported that Tehran is cutting off diplomatic channels with Washington and moving to fully block the strategic Strait of Hormuz.
The sudden breakdown in diplomacy shattered fragile market optimism, reversing earlier trading dynamics and sending energy markets into a tailspin.
WTI crude surged 7.69% to approach $93 per barrel, while Brent crude jumped 6.62%, trading well above $95 per barrel as investors reacted to the severe escalation in geopolitical risk.
According to a translated report from Iran’s state-affiliated Tasnim news agency on the social media site Telegram, Iranian negotiators will immediately stop exchanging messages with the U.S. through intermediaries. The dramatic pivot is reportedly a direct retaliation for ongoing ceasefire violations, specifically homing in on Israel’s military operations against the Iran-backed militia Hezbollah in Lebanon.
“No dialogue will take place until Israel fully withdraws from occupied areas in Lebanon and stops all attacks in both Lebanon and Gaza,” Tasnim reported.
The report added that the “resistance front and Iran have resolved to completely block the Strait of Hormuz and activate other fronts including the Bab al-Mandeb Strait, in order to punish the Zionists and their supporters.”
This comes as Trump reportedly requested stronger language on Iran’s nuclear commitments and more explicit provisions governing the reopening of Hormuz, indicating that negotiations are not nearing completion, as suggested by Washington. CNN reported that the president reviewed the draft agreement with advisers before sending it back for changes, with discussions expected to continue for at least another week.
The latest proposal reportedly includes a 60-day cessation of hostilities, provisions to reopen the Strait of Hormuz, and a framework for future nuclear negotiations. However, major sticking points remain, including the fate of Iran’s highly enriched uranium stockpile, the scope of sanctions relief, and the guarantees Tehran is demanding before signing a final agreement.
Hormuz remains the most important energy chokepoint in the world, carrying roughly one-fifth of global oil trade and a significant share of LNG exports from Gulf producers. Any delay in securing unrestricted shipping through the waterway is likely to keep a geopolitical risk premium embedded in crude prices
Over the weekend, Trump attempted to infuse more optimism into a deal, saying on Truth Social that Iran “really wants to make a deal” while urging critics to allow negotiations to continue. In a separate interview with Fox News, he reiterated that preventing Iran from obtaining a nuclear weapon remains his primary objective and warned that military options remain available if diplomacy fails. Trump also said Iran had agreed to language preventing it from developing, acquiring, or purchasing a nuclear weapon, despite his request for nuclear-related revisions.
Tehran publicly pushed back Monday, with Iranian Foreign Ministry spokesman Esmaeil Baqaei saying there were currently no discussions taking place with Washington on the technical details of Iran’s nuclear program, adding that ending the war remains Iran’s immediate priority. At the same time, Iranian media reported that both sides continue exchanging revisions to the draft agreement, suggesting negotiations remain active despite conflicting public messages from Washington and Tehran.
By Michael Kern for Oilprice.com
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