Crude markets extended gains on Tuesday as concerns about the US-Iran ceasefire increased following President Trump’s rejection of Tehran’s latest counterproposal.
The US President described the ceasefire as on “massive life support,” adding to the uncertainty. With diplomatic progress stalling, fears of a re-escalation could keep the market on edge.
In the meantime, the extended shutdown of the waterway continues to disrupt global flows of crude. A prolonged blockade could make normalisation more difficult and push it toward 2027. On the demand side, oil importers could continue to turn to alternative sources in the US and other countries, as the physical market remains tight.
The outlook remains skewed to the upside while risks of an escalation remain persistent. Supply deficits are likely to keep prices elevated, with volatility remaining high around any diplomatic headline. In this regard, a credible diplomatic resolution could put downside pressure on prices, although some hurdles to rapid normalisation could remain.
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