Oil prices climbed on Monday after Israeli Prime Minister Benjamin Netanyahu warned that the conflict with Iran was “not over,” heightening fears of renewed escalation in the Middle East and further disruptions to global energy supplies.
The gains also came as US President Donald Trump rejected Iran’s counterproposal aimed at ending the war involving the United States and Israel.
“I have just read the response from Iran’s so-called ‘Representatives.’ I don’t like it — TOTALLY UNACCEPTABLE!” Trump said.
US West Texas Intermediate (WTI) crude futures for June delivery rose 2% to $97.40 per barrel as of 4:48 a.m. ET, while international benchmark Brent crude futures for July delivery gained 2.5% to $103.80 per barrel.
Both WTI and Brent have surged about 40% since the U.S.- and Israeli-led war against Iran began on February 28, reflecting growing market anxiety over the stability of energy exports from the region.
Speaking in an interview with CBS’s “60 Minutes” aired Sunday night, Israeli Prime Minister Benjamin Netanyahu said significant military and strategic objectives in Iran remained unresolved.
“There’s still nuclear material, enriched uranium that has to be taken out of Iran,” Netanyahu said. “There is still enrichment sites that have to be dismantled, there’s still proxies that Iran supports, there are ballistic missiles that they still want to produce … there’s work to be done.”
When asked how the United States and Israel intended to remove the nuclear material, Netanyahu replied: “You go in, and you take it out.”
Analysts at Citigroup said in their latest oil market report that crude prices could climb even higher if Tehran and Washington fail to reach an agreement.
The bank noted that oil markets have so far been cushioned by high inventories, releases from strategic petroleum reserves, weaker demand in developing economies and intermittent signs of possible de-escalation in the Middle East.
However, Citi maintained that the risks to oil prices remain skewed to the upside because Iran still holds considerable influence over the timing and conditions of any agreement to reopen the vital Strait of Hormuz shipping route.
“We assume that the regime will make a deal that reopens the Strait around end-May … but we continue to see the risks skewed towards this timeline being pushed out and/or a partial reopening, which means disruptions for longer,” the analysts said.
Felipe Elink Schuurman, chief executive officer and co-founder of Sparta Commodities, compared the current oil supply shock to the disruption caused by the COVID-19 pandemic.
“In 2020, on average, we lost 9 million barrels per day of demand versus 2019, which is pretty much the equivalent of what we are losing now in terms of supply. So, the market will have to adjust, and we will have to get to that level of demand destruction,” Schuurman said on CNBC’s “Squawk Box Europe” on Monday.
“Now the question is ‘where is that demand destruction going to come?’ And unfortunately, it’s going to be a situation where the richer countries are going to pay up. Maybe you don’t see $200 on crude, but you will see that on a regular basis on products, which is what people consume,” he added.
“You are going to end up in a scenario where poorer countries are going to have a humanitarian crisis, Europe is going to have an economic crisis and the US , a political one,” Schuurman warned.
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