Brent crude climbed 5% to $107.24 a barrel on Thursday, clawing back most of the ground it lost earlier this week when hopes of a ceasefire briefly pushed prices below $90. WTI rose to $94.32.
The rally came after Iran's Foreign Minister Abbas Araghchi went on state television Wednesday night and shut the door on Washington's 15-point peace proposal. "We do not plan on any negotiations," he said.
Iran's five demands
Tehran issued its own counter-proposal with conditions that traders called a non-starter:
- A complete halt to US and Israeli attacks and assassinations
- Mechanisms to guarantee the war does not resume
- Compensation for damages caused during the conflict
- An end to all strikes against Hezbollah in Lebanon and pro-Iranian militias in Iraq
- International recognition of Iran's sovereignty over the Strait of Hormuz
That last point is the deal-breaker. Roughly one-fifth of all seaborne oil passes through the strait, and no Western government is likely to hand Tehran permanent authority over it.
Fresh attacks across the Gulf
Hours after the rejection, Iranian drones and missiles struck targets across the region. A fuel tank at Kuwait International Airport caught fire after a drone penetrated the country's air defenses. Saudi Arabia shot down at least eight drones over its Eastern Province, and missile sirens sounded in Bahrain.
Iran also continued to pick and choose who can use the waterway it claims to control. Tehran said "non-hostile" ships may transit the strait, but shippers and insurers remain wary of the vague terms.
White House insists talks are alive
The disconnect between Washington and Tehran was on full display. White House press secretary Karoline Leavitt told reporters "talks continue" and called them "productive." Pakistan's foreign minister confirmed his country had delivered the American proposal to Iranian officials and that indirect messages are flowing through Islamabad, Ankara, and Cairo.
But Araghchi drew a sharp line between receiving a document and agreeing to sit down. "An exchange of messages does not mean negotiations with the US," he said.
Diplomats are still pushing for face-to-face talks as early as Friday in Pakistan. Whether Iran shows up is an open question.
What traders are watching
The four-week Hormuz blockade has already wiped out more than 90% of traffic through the strait, according to vessel-tracking firm Kpler. The IEA released a record 400 million barrels from emergency reserves on March 11, but the drawdown barely dented prices.
Gold fell $129.70 to $4,422.60 an ounce as risk appetite returned to energy markets. Natural gas held steady near $2.92 per MMBtu.
With Iran digging in and Washington running low on diplomatic leverage, traders are bracing for prices to stay volatile. The OPEC basket sat at $132.21 a barrel, down nearly $9 from earlier highs but still well above pre-war levels.