Oil prices rose more than 1% in early trade on Wednesday as fresh tensions in the Middle East rattled markets. Iran launched missiles toward Kuwait and Bahrain, while efforts to revive diplomatic engagement between Tehran and Washington appeared to make little headway.
According to the U.S. military, Iran fired ballistic missiles at Kuwait and Bahrain, though none of the targets were hit. In response to what it described as attempted attacks, U.S. forces carried out strikes on Iran's Qeshm Island.
Crude oil price on June 3
Brent crude futures gained $1.05, or 1.09%, to $97.05 a barrel, while U.S. West Texas Intermediate (WTI) crude advanced $1.01, or 1.08%, to $94.77.
Investors continued to track developments surrounding the conflict, with Iran reviewing a proposed agreement from the United States aimed at ending hostilities. Iranian media reported on Tuesday that Tehran had not been in contact with Washington for several days. U.S. President Donald Trump, however, maintained that negotiations were continuing.
Signals from both sides of the negotiations remained mixed. While Trump said on Monday that discussions with Iran were ongoing, Iran's Tasnim news agency reported that indirect talks with Washington had been suspended.
Speaking separately to CNBC, Trump said he would not be concerned if the negotiations came to an end. Shortly afterward, however, he stated on social media that talks were still in progress. He also told ABC News that he expected an agreement to extend the ceasefire and reopen the Strait of Hormuz within the next week, according to a post by the broadcaster on X.
More than three months after the United States and Israel launched strikes on Iran, the conflict remains deadlocked, with a fragile ceasefire still in place.
Markets are closely watching whether negotiations between Washington and Tehran lead to meaningful progress or encounter further obstacles. Traders are particularly focused on comments regarding the Strait of Hormuz and on actual tanker movements through the strategically important waterway.
Elsewhere in the region, Lebanon announced a partial ceasefire between Hezbollah and Israel on Monday. The development is being viewed as a modest step toward reducing tensions in a broader conflict that has drawn in Iran.
Analysts said that even if a ceasefire is formally reached, shipping through the Strait of Hormuz may take several months to return to normal. Any damage to energy infrastructure could extend the recovery period further.
Last month, Saudi Aramco Chief Executive Officer Amin Nasser warned that disruptions in the Strait of Hormuz could delay stability in global oil markets until 2027. He said prolonged disruptions could impact nearly 100 million barrels of oil supply each week. Saudi Aramco is the world's largest oil producer.
Morgan Stanley said the oil market is currently engaged in "a race against time," cautioning that the factors which have so far limited a sharper rise in crude prices may begin to weaken if the Strait of Hormuz remains shut through June.
The brokerage noted that stronger U.S. crude exports and softer Chinese demand have helped absorb part of the supply shock. However, it warned that a prolonged closure of the waterway could tighten global supplies once again if disruptions continue beyond the point that the U.S. and China can offset.
