A general view of the oil terminal of Kharg Island, 25 km from the Iranian coast in the Persian Gulf and 483 km northwest of the Strait of Hormuz, in Iran on March 12, 2017.
Anadolu | Anadolu | Getty Images
Oil prices fluctuated in volatile trading on Tuesday as traders assessed President Donald Trump’s alleged statements about ending the war in Iran.
Trump told advisers that he was ready to end US operations against Iran even if the Strait of Hormuz remained closed, as the need to force Tehran to reopen the oil bottleneck could prolong the conflict, the Wall Street Journal reported late Monday in the US.
West Texas Intermediate futures for May delivery were down 0.5% at $102.3 a barrel at 4:20 a.m. ET. May Brent crude futures rose 0.16% to $112.9 a barrel after paring declines.
“The president’s desire for a large-scale, extensive bombing of Iran is pretty low,” Matt Gertken, chief geopolitical strategist at BCA Research, told CNBC’s “Squawk Box Asia” on Tuesday, describing Trump’s recent threats as an attempt to “back off and make a deal.”
“[Trump] requires at least highly enriched uranium. That is [something] “The Iranians could actually deliver and in return maintain the survival of the regime,” Gertken said, adding that there was no chance the U.S. would carry out a full-scale ground invasion.
“But if we don’t get it within two weeks, [Trump] will have to escalate…target the core [Iranian] Regime elements, and that will lead to higher collateral damage.”
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Trump had previously threatened to expand attacks on Iran’s civilian energy infrastructure, including water desalination plants, if Tehran failed to reopen the Strait of Hormuz.
Trump said Monday that if Tehran does not reopen the Strait of Hormuz and agree to a peace deal to end the war, “we will complete our beautiful ‘stay’ in Iran with the blowing up and complete destruction” of power plants, oil facilities and “possibly” desalination infrastructure, according to a Truth Social post.
The Iran war is entering its fifth week and hostilities are escalating across the region. Tehran struck a fully loaded Kuwaiti oil tanker in the anchorage area of Dubai port early Tuesday.
“The relevant authorities in Dubai have confirmed the success of the teams in extinguishing the fire that hit a Kuwaiti oil tanker,” said a social media post from the Dubai government.
This incident suggests the Islamic Republic is further tightening its grip on the Strait of Hormuz and targeting tankers just outside the waterway, said Ben Emons, CIO at Fed Watch Advisors, pointing to renewed risks of further disruption to energy flows.
“The result is a more asymmetrical game, with the U.S. leaning towards exit and Iran still having incentives to impose costs,” Emons said.
Trump regularly vacillated between hailing talks with Iran as productive and warning that he was ready to send more forces to the region.
He told reporters on Monday that Tehran had agreed to “most” of the 15-point ceasefire proposal put forward by the US, while Tehran had publicly rejected the terms and responded with its own terms, including maintaining control of the Strait of Hormuz.
Trump has also reportedly considered the option of sending ground troops to capture Kharg Island, a key fuel hub that handles 90% of Iran’s crude oil exports.
Shipping traffic across the Hormuz Waterway, which typically carried a fifth of global oil shipments by sea before the conflict, has virtually come to a standstill since the war began on February 28.
Experts warn that a possible ground operation to capture Kharg Island risks increasing U.S. casualties and prolonging the cost and length of the war.
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