Oil Prices Surge as Iran Suspends U.S. Talks Amid Middle East Tensions

Global oil prices jumped sharply on Monday, recovering from significant losses recorded in May, after Iran reportedly suspended negotiations with the United States following renewed military tensions across the Middle East. Escalating conflict involving Iran, Israel, and Lebanon reignited concerns over energy supplies, driving crude oil markets higher.

Brent crude futures for August delivery climbed 4.4% to $95.16 per barrel, while U.S. West Texas Intermediate (WTI) crude futures for July delivery surged 5.6% to $92.30 per barrel.

Market sentiment shifted after Iran’s semi-official Tasnim News Agency reported that Tehran had halted diplomatic exchanges with Washington through mediators. The move was reportedly linked to recent military actions in Lebanon and what Iran described as violations of an ongoing ceasefire. Tasnim also claimed that Iran was considering a complete blockade of the Strait of Hormuz, a critical global shipping route responsible for transporting a large portion of the world's oil supplies.

Despite the reports, U.S. President Donald Trump stated that negotiations with Iran were still progressing. Speaking to NBC News and later posting on Truth Social, Trump said discussions were continuing rapidly and that he had not received confirmation that Iran had ended talks.

Regional tensions intensified after the U.S. military conducted strikes on Iranian radar and drone-control facilities over the weekend. According to U.S. Central Command, the operations were carried out in response to Iranian military actions, including the downing of an American drone and missile threats targeting U.S. bases in Kuwait.

Meanwhile, Israel expanded military operations in Lebanon following drone attacks launched by Hezbollah. Although Israel initially planned strikes near Beirut, Trump later announced that the operation would not proceed after discussions with Israeli Prime Minister Benjamin Netanyahu.

Oil markets remain highly sensitive to developments surrounding the Strait of Hormuz. While hopes for a U.S.-Iran agreement contributed to lower oil prices throughout May, uncertainty over regional stability continues to support elevated crude prices.

Brent crude recorded its worst monthly performance since March 2020, falling 18.5% in May, while WTI declined 16.9%, marking its largest monthly drop since April 2025. However, oil prices remain well above pre-conflict levels due to ongoing supply disruptions.

Analysts at Deutsche Bank expect a U.S.-Iran agreement to be reached during June, potentially allowing shipping through the Strait of Hormuz to resume and pushing Brent crude toward $86 per barrel later this year. However, they warned that a prolonged closure of the strategic waterway could send oil prices soaring to $150 per barrel, increasing inflation, slowing global economic growth, and raising recession risks, particularly in Europe.

The bank also revised its global inflation outlook higher, forecasting consumer price growth of 3.8% in 2026 as elevated energy costs continue to impact economies worldwide.