Key Takeaways:
Israel delayed airstrikes on Beirut's southern suburbs at Washington's request as the US advanced a ceasefire initiative, sending Brent crude above $96 a barrel on reports Iran may quit peace talks.
Israel delayed airstrikes on Beirut's southern suburbs at Washington's request as the US pushed a ceasefire initiative, sending Brent crude above $96 a barrel on reports Iran may suspend involvement in peace negotiations.
"Any delay in military action creates a window for diplomacy, but that window is narrowing with each exchange of fire," said a person familiar with the discussions, who spoke on condition of anonymity because the talks are private. The report, from Chinese state broadcaster CCTV citing unnamed sources, has not been officially confirmed by Israel.
Brent crude rose as much as 6.5% to $97 a barrel for August delivery, while West Texas Intermediate jumped 7% to above $93 a barrel for July delivery, after Iran's semiofficial Tasnim News Agency reported Tehran would suspend involvement in peace negotiations and seek "complete closure" of the Strait of Hormuz. The report could not be independently verified. The S&P 500 traded flat, while the Stoxx 600 in Europe fell 1%. The 10-year Treasury yield rose above 4.5%.
The Strait of Hormuz handled about 21% of global oil trade before the war began in late February. With Iran's naval blockade effectively cutting that flow, the US has guided about 70 commercial ships through the waterway over the past three weeks, according to US officials. A collapse of the ceasefire framework could push oil above $100 a barrel for the first time since 2022.
Escalation on multiple fronts
The ceasefire between the US, Israel and Iran, which took effect in early April, has frayed significantly. The US military said it intercepted two Iranian ballistic missiles targeting American forces in Kuwait early Monday, with no casualties reported. Over the weekend, the US struck radar and drone command-and-control sites in the Iranian cities of Goruk and on Qeshm Island, according to US Central Command.
Iran's military headquarters responded by threatening retaliatory attacks on northern Israel if Israel struck Beirut's southern suburbs, a Hezbollah stronghold known as Dahiya. Prime Minister Benjamin Netanyahu said he had ordered the military to attack the area, prompting thousands of residents to flee. Hours later, no strike had materialized.
The last time tensions reached this level was in April, when the initial US-Iran ceasefire was brokered. That truce has since been undermined by continued Israeli operations in southern Lebanon and Hezbollah's rocket fire into northern Israel. Israel captured the strategic Beaufort Castle in southern Lebanon on Sunday, its most significant territorial gain in decades.
Oil markets on edge
The potential disruption to global energy supplies has already reshaped crude markets. Gasoline prices in the US have risen 45% since the war began, to a national average of $4.32 a gallon, according to AAA. The average price of diesel stands at $5.45 a gallon, up 45% from before the conflict.
President Donald Trump has toughened the terms of a potential framework for a deal to end the war, according to three US officials, and sent revised proposals to Iran for consideration. The framework would effectively end the US-Israeli military campaign in exchange for Iran lifting its blockade of the Strait of Hormuz. Some of the thorniest issues, including the future of Iran's nuclear program, would be deferred to later rounds of talks.
This article is for informational purposes only and does not constitute investment advice.
