Crude oil costs climb higher as diplomatic efforts to end Iran conflict hit a standstill

Oil prices saw a surge on Monday as negotiations to bring an end to the Iran war appeared to have stalled, with the Strait of Hormuz remaining closed.

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The White House indicated that Donald Trump and his team were reviewing Tehran's latest proposal to restore traffic through the waterway, but according to CNN and the Wall Street Journal, the president was sceptical of the plan.

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This week, the Islamic republic submitted a proposal that would involve easing its grip on the waterway in exchange for Washington lifting its retaliatory blockade on the country's ports, with talks also focusing on Iran's nuclear programme.

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US Secretary of State Marco Rubio described Iran's proposal as "better than what we thought they were going to submit", but emphasized that any deal must "definitively prevent them from sprinting towards a nuclear weapon".

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Iranian defence ministry spokesman Reza Talaei-Nik called on Washington to "abandon its illegal and irrational demands", stating that the United States was "no longer in a position to dictate its policy to independent nations".

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Qatar warned of the possibility of a "frozen conflict" if a definitive resolution was not found, as concerns over the stalled peace push continued to drive crude prices higher for more than a week.

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Donald Trump's decision to cancel his envoys' trip for peace talks in Pakistan last weekend added to the downbeat mood, with Brent prices now above the level reached before the two sides announced a ceasefire at the start of April.

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West Texas Intermediate broke $100 on Tuesday for the first time in two weeks, and both contracts continued to rise on Wednesday, with Brent holding above $113 and WTI above $101.

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According to Stephen Innes at SPI Asset Management, "Iran wants the blockade lifted and access to its flows restored", while "Washington holds that lever and is in no hurry to give it away without extracting value".

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Innes also noted that "the longer this drags on, the more second-order effects start to bite, with storage pressure building, production risks emerging, and the system beginning to strain in ways that futures prices cannot ignore".

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The news that key producer United Arab Emirates had decided to withdraw from the OPEC and OPEC+ oil cartels on Friday had little major impact, with the move described as a strategic decision.

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CNN cited sources familiar with the mediation as saying that the two sides were not as far apart as they seemed, with intense diplomacy continuing and talks focused on a staged process to return to the pre-war status and reopen the Strait.

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Iran's nuclear programme would be dealt with at a later stage, according to the report, which added that the first part of a potential deal aimed to restore the pre-war status and reopen the Strait.

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Despite the uncertainty, Asian equity markets mostly rose, with Hong Kong up more than one percent, while Shanghai, Seoul, Wellington, Manila, Bangkok, Mumbai, and Jakarta also advanced.

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Sydney, Singapore, and Taipei fell, along with London, Paris, and Frankfurt, while Tokyo was closed for a holiday, and traders received a weak lead from Wall Street due to a tech selloff.

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The tech selloff was triggered by a report in the Wall Street Journal that ChatGPT-maker OpenAI had missed targets on the number of users and revenue, as markets prepared for the release of earnings from Wall Street titans Amazon, Google, Meta, and Microsoft.

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The Federal Reserve was set to conclude a two-day meeting later in the day, with investors keeping a close eye on its outlook for inflation and interest rates as energy costs continued to soar.

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Key figures at 0715 GMT included West Texas Intermediate, which was up 1.8 percent at $101.76 a barrel, and Brent North Sea Crude, which was up 1.8 percent at $113.23 a barrel.

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The Hang Seng Index in Hong Kong was up 1.7 percent at 26,111.84, while the Shanghai Composite was up 0.7 percent at 4,107.51, and the London FTSE 100 was down 0.7 percent at 10,262.60.

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The euro/dollar was down at $1.1700 from $1.1712 on Tuesday, the pound/dollar was down at $1.3501 from $1.3515, and the dollar/yen was up at 159.66 yen from 159.64 yen.

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The euro/pound was up at 86.66 pence from 86.64 pence, and the New York Dow was up 0.1 percent at 49,141.93.