Crude oil prices diverged in midday trading on Tuesday as investors weighed renewed US strikes on Iranian targets against hopes of a peace deal, leaving the market caught between geopolitical risk and hopes of a peace deal.
Front-month West Texas Intermediate crude futures slipped 2.62% to $94.00 per barrel, while Brent futures jumped 4.07% to $100.03/bbl.
Brent closed 6% lower on Monday, amid expectations that the US and Iran would soon reach a deal, while peace hopes were reflected in WTI prices on Tuesday, as WTI did not settle on Monday due to the US Memorial Day holiday.
On Tuesday, US forces "conducted self-defense strikes in southern Iran," targeting vessels allegedly trying to deploy mines, as well as missile launch locations. The US Central Command said the actions were intended "to protect our troops from threats posed by Iranian forces."
The strikes happened as Iranian Parliament Speaker Mohammad Baqer Qalibaf and Foreign Minister Abbas Araghchi were in the Qatari capital, Doha, for talks on a potential deal to end the Middle East conflict.
Iran's Foreign Ministry condemned the US attacks as a violation of a ceasefire that's been in place since early April, while Supreme Leader Mojtaba Khamenei said that the "nations and lands of the region will no longer be a shield for American bases."
"Without any doubt, the Islamic Republic of Iran will leave no act of aggression unanswered and will show not the slightest hesitation in defending the sovereignty and territorial integrity of Iran," the Foreign Ministry said in a statement.
Iran's Islamic Revolutionary Guard also vowed to retaliate against violations of the ceasefire after it identified and engaged US drones and an F-35 jet fighter that entered the country's airspace.
ING strategists said President Trump suggested over the weekend that progress has been made on a deal to end the Middle East conflict, but "we've been at this stage before, only for talks to break down."
The US strikes came hours after President Trump said negotiations with Iran to extend their ceasefire and reopen the Strait of Hormuz are proceeding.
On Monday, Trump said that negotiations with Iran are "proceeding nicely." However, the US President said the US would not rush into a deal, and that Washington's blockade of the Strait of Hormuz would remain until an agreement was reached.
Traffic continues to trickle through the Strait of Hormuz, with Centcom saying the US Navy has redirected 108 commercial vessels as of May 26 to ensure compliance.
The UK Maritime Trade Operations Center said on Tuesday that it received a report of an "external explosion" near a vessel some 60 nautical miles from the Omani capital Muscat.