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New Delhi: Oil prices have risen 6% on Monday after the US and Iran have presented different versions of their upcoming peace talks. This rebound has come at a time when the prospects for peace were dimmed when the US seized an Iranian cargo ship that tried to break its blockade of the Strait of Hormuz.
Prior to that, Iran said it had lifted the blockade on the Strait and this development forced the Iranian regime to reimpose the blockade prior to the peace talks that are scheduled to be held in Pakistan.
Mixed Signals and “Retaliation Deadlines”
These developments have triggered a market rally, with brent crude prices rising to $96.88, its lowest level since March 10, even as it has remained unclear which countries ships will be allowed to transit from the Strait.
Impact on Global Markets
The sudden price spike has rattled global equity markets, even forcing many tankers to anchor in the Gulf of Oman or redirect around Africa, drastically increasing transit times. This is expected to increase the chances of higher fuel costs globally. Economists warn that if crude oil reaches and stays above the $110 mark for an extended period, the chances of global inflation could rise drastically.
This has forced the IEA and major economies to release millions of barrels from their Strategic Petroleum Reserves (SPR), but this remains a short-term solution for just a few weeks. This physical unavailability of oil has outweighed the psychological impact of emergency strategic reserves.
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