Oil prices saw a significant rise on Thursday as they recovered some of their previous losses, driven by investors reassessing the prospects for de-escalation in the Middle East. Meanwhile, Iran reported that it is still reviewing the U.S. proposal aimed at ending the conflict that has impacted energy flows.
Brent crude futures rose by $1.13, or 1.1%, reaching $103.35 per barrel by 00:51 GMT. Similarly, U.S. West Texas Intermediate crude futures increased by $1.08, or 1.2%, to $91.40 per barrel. This increase follows a drop of over 2% in both major indices on Wednesday.
Details of the Event
Despite reviewing the U.S. proposal, the Iranian Foreign Minister confirmed that the country does not intend to engage in talks to end the escalating conflict in the region. In this context, White House spokesperson Caroline Levitt stated that U.S. President Donald Trump will tighten sanctions on Iran if Tehran does not acknowledge its military defeat.
The U.S. proposal, consisting of 15 points and sent via Pakistan, includes the removal of Iran's stockpiles of enriched uranium, halting enrichment, curbing its ballistic missile program, and cutting funding to its regional allies, according to Israeli government sources.
Background & Context
The ongoing conflict has led to a near-total halt of shipments through the Strait of Hormuz, which typically transports about 20% of the world's crude oil and liquefied natural gas supplies. The International Energy Agency described this disruption as the largest in the history of oil supplies. Concurrently, India has purchased its first shipment of Iranian liquefied petroleum gas in years, following a temporary lifting of U.S. sanctions on Iranian oil.
In a related context, Japanese Prime Minister Sanai Takayuchi requested the head of the International Energy Agency, Fatih Birol, to coordinate the release of additional oil stocks, as Tokyo attempts to hedge against a prolonged conflict in the Middle East.
Impact & Consequences
Three Iraqi energy officials reported a sharp decline in Iraqi oil production, with oil tanks reaching critical high levels. Concerns about supply have also increased, as at least 40% of Russian oil export capacity has been halted due to Ukrainian drone attacks, a controversial strike on a major pipeline, and the detention of oil tankers.
In the United States, crude oil inventories rose by 6.9 million barrels to 456.2 million barrels for the week ending March 20, the highest level since June 2024, exceeding analysts' expectations.
Regional Significance
Concerns are growing regarding the conflict's impact on food security in the region, with Egypt being one of the largest wheat importers in the world. The Egyptian government has taken urgent measures to ensure supply chain stability, with President Abdel Fattah el-Sisi convening a meeting with relevant ministers to discuss the conflict's implications for the Egyptian economy.
Attention is turning to how rising oil prices will affect inflation in the region, as higher oil prices tend to fuel inflation by increasing transportation and manufacturing costs. While rising inflation typically enhances the appeal of gold as a hedge, high interest rates negatively impact demand for this asset.
In conclusion, the situation in the Middle East remains volatile, directly affecting oil prices and global energy markets, reflecting the importance of regional stability in achieving economic security.