Crude oil futures surged in midday trading on Tuesday as prospects for a peace deal to end the conflict between the US and Iran dimmed, as the two countries' stark differences pushed global supply concerns back to the fore.
Front-month West Texas Intermediate crude futures rose by 3.40% to $101.44 per barrel, while Brent futures were up 2.97% to $107.30/bbl.
On Monday, President Trump said that the ceasefire with Iran was on "life support," citing differences over Iran's demands to end hostilities on all fronts, lifting of a US naval blockade, the resumption of Iranian oil sales and compensation for war damage.
Tehran also emphasized its sovereignty over the Strait of Hormuz, a strategic waterway that normally handles about 20% of global oil and liquefied natural gas.
During a White House interaction with reporters on Monday, Trump said that the response from Iran to his latest offer was a "piece of garbage", while noting that "it's just a question of time" with Tehran, the US does not need to rush.
Iran's parliament speaker Mohammad-Bagher Ghalibaf posted on X on Tuesday, "There is no alternative but to accept the rights of the Iranian people as laid out in the 14-point proposal."
Separately, Ebrahim Rezaei, a spokesperson for the Iranian parliament's foreign policy and security committee, said the country could enrich uranium to up to 90% purity if the US-Israeli alliance launches another attack, according to Iranian media.
"Oil prices climbed for a second day as the global oil market continued to tighten amid limited prospects for a reopening of the Strait of Hormuz," Saxo Bank strategists said in a note Monday.
Meanwhile, shipping via the Hormuz has slowed to a trickle, with data analytics firm Kpler projecting that 79% of 53 vessels which entered the Persian Gulf before the outbreak of the conflict are unable to exit.
Daniel Hynes, senior commodity strategist at ANZ, said Trump is considering renewing Project Freedom, aimed at guiding vessels through the Strait.
The first attempt triggered attacks by Iranian forces on a US military vessel and the UAE's key oil export facility at Fujairah, Hynes said.
On the supply front, disruptions to crude oil production in the Middle East have surged since April, with major Gulf producers collectively shutting in about 10.5 million barrels per day, according to the US Energy Information Administration's latest Short-Term Energy Outlook.
The EIA said Iraq, Saudi Arabia, Kuwait, the UAE, Qatar and Bahrain have all curtailed output amid the ongoing Middle East conflict, with the Hormuz assumed to remain effectively closed until late May.
The agency now projects global crude inventories to fall by an average of 8.5 million barrels per day in Q2, while prices will average $89 per barrel by Q4.