Oil prices fell and stocks rose on Tuesday as investors weighed a possible path to a peace deal, with the United States and Iran trading proposals for a suspension of Iranian nuclear activity.
Washington and Tehran are negotiating on how long Iran would suspend uranium enrichment as part of a plan to hammer out a peace agreement. The discussions took place as the U.S. Navy began its blockade of Iranian ports on Monday. Ship traffic through the Strait of Hormuz remained light, although a handful of vessels have made the transit since the start of the blockade.
Oil prices slide.
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The price of Brent crude, the global benchmark for oil, traded around $98 a barrel on Tuesday, down less than 1 percent. Oil prices had jumped above $100 on Sunday night, following the breakdown of weekend peace talks and announcement of the U.S. blockade.
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West Texas Intermediate crude, the U.S. benchmark, was around $97 a barrel, down 2 percent on the day.
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Investors and analysts are focused on the continued disruption to shipping in the Strait of Hormuz, the narrow waterway between Iran and Oman that is a vital trading route for oil and natural gas that normally carries as much as one-fifth of the world’s oil supply.
Stocks jump.
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Stocks in Asia, where countries import vast quantities of oil and gas, rose sharply on Tuesday. Equity markets in Japan, Taiwan and South Korea all rose by more than 2 percent.
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In Europe, stocks posted gains. The Stoxx 600, a broad index that tracks the region’s largest companies, rose 0.8 percent. Germany’s DAX index was among the biggest gainers, up 1 percent.
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Futures on the S&P 500 rose 0.2 percent, pointing to a small bump when trading resumes in the United States on Tuesday.
Gasoline prices decline slightly.
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U.S. gas prices fell by a penny on Tuesday, to a national average of $4.12 a gallon, according to the AAA motor club. The increase in prices since the war began has raised the cost of regular gas for drivers 38 percent.
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Gas prices don’t move in lock step with crude, usually trailing increases or drops by a few days.
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Diesel prices have increased more quickly in recent weeks and stood at $5.65 on Monday, up some 50 percent since the start of the war.
What they are saying: ‘Demand destruction will spread’
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The International Energy Agency on Tuesday sharply revised its forecasts for the global supply and demand for oil because of the war in Iran. The agency expects oil demand in the current quarter to shrink by 1.5 million barrels per day, which would be the deepest decline since the Covid-19 pandemic, as the spike in prices drives cutbacks around the world.
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The largest cuts to demand have so far come in the Middle East and Asia, but “demand destruction will spread as scarcity and higher prices persist,” the agency noted.
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Resuming the typical flow of energy supplies via the Strait of Hormuz “remains the single most important variable in easing the pressure on energy supplies, prices and the global economy,” the agency said. Before the war, 20 million barrels of oil and related products passed through the strait every day. In early April, flows had fallen to less than four million barrels a day, and that was before the U.S. Navy blockade on Iranian ports.
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