US President Donald Trump's remarks on Wednesday that the interim memorandum of understanding with Iran was "over" do not necessarily signal the end of negotiations between the two countries, and little should be read into them until more clarity emerges, energy sector analysts told.
Speaking ahead of a NATO summit in Turkey, the US president stated that the Pakistan-mediated ceasefire accord is over and called it "a waste of time."
This follows an escalation of military actions in the Middle East.
On Tuesday, the US Central Command launched a massive wave of retaliatory airstrikes across Iran after three commercial oil tankers were targeted and struck by projectiles in the Strait of Hormuz. Simultaneously, the economic components of the peace accord have been swiftly dismantled.
Meanwhile, Iran's Islamic Revolution Guards Corps reportedly struck US military facilities in Bahrain and Kuwait with drones and missiles in retaliation.
"I would personally caution against reading too much into the comments just yet," said Nader Itayim, Mideast Gulf Editor at Argus Media.
"Yes, this is some of the strongest language that we've heard from Trump, and yes, the comments followed the most intense exchange of fire since the MoU was signed. But as of now, the Iranians are not reciprocating this idea of the MOU being over, and Trump still has left the door open to negotiations."
Despite the fragility of the situation and the risk of a collapse in discussions, both sides are still trying to "negotiate through power" at this point, Itayim said.
Echoing that, Neil Crosby, Head of Research at Sparta Commodities, toldthat more clarity was needed on what Trump's statement means for the MoU and the conflict.
"Prices are likely to fade if we don't get much more information this week. The whole flow out of Hormuz is at risk so more recently we are talking some 10 [million barrels per day]. And of course, many escalation scenarios ahead. But also de-escalation is still possible, perhaps this is just a new negotiation tactic," he said.
Trump's statement is likely to, however, force the market to reassess the situation and reintroduce some of the risk premium amid expectations of an improvement in the conditions and flow of traffic through the Strait of Hormuz, Argus's Itayim said.
The exchange of strikes between the US and Iran has left flows through the Hormuz vulnerable and the recent escalation is likely to further discourage shippers from deploying vessels to the region, Itayim said.
"Flows (through Hormuz) are definitely vulnerable. They have been for several weeks now, even after the MoU was signed.... But the sporadic attacks, and the regular back-and-forth between Iran and the US over who controls the strait has left little chance for things to return to normal," he said.
"The attacks will have put the shipping industry on alert, and it could further deter shipping companies from sending vessels to the region."