Market News

(Bloomberg) -- Oil rose as comments from President Donald Trump reined in speculation about a quick end to the conflict between Israel and Iran, keeping the market on edge about potential crude supply disruptions in the Middle East.

West Texas Intermediate added about 3% to trade around $74 a barrel in a choppy session that saw prices swing between gains and losses. The uncertainty drove a gauge of crude market volatility to three-year highs.

After leaving the Group of Seven leaders meeting in Canada early, Trump played down the prospect of a ceasefire between Israel and Iran and said he wants “a real end” to the conflict. He told reporters aboard Air Force One that he wanted Tehran’s nuclear program “wiped out,” according to CBS.

Trump said on Tuesday that he hadn’t reached out to Iran for peace talks in “any way, shape, or form,” but that “if they want to talk, they know how to reach me.”

So far, Iran’s crude-exporting infrastructure has been spared, and most of the fallout has been confined to shipping. The market remains focused on any sign that Tehran may seek to disrupt crude flows across the Strait of Hormuz, through which about a fifth of the world’s daily output passes.

Elevated options trading indicates that “investors are still positioning for potential price spikes this month as tensions persist,” said Razan Hilal, market analyst at Forex.com.

An incident in which two oil tankers collided near the waterway was a reminder of the risks to energy flows in the region. Navigation signals in the Strait of Hormuz and the Persian Gulf are facing increasing interference that’s affecting positional reporting, according to the UK Navy, and some shipowners are reluctant to accept bookings in the region, citing safety concerns.

A blaze spotted in waters near the area on Tuesday isn’t security related, according to a maritime risk firm.

Oil prices still remain significantly higher than where they were before the attacks began, which prompted record volumes of producer hedging as well as futures and options changing hands. Morgan Stanley has hiked its price forecasts, citing increased risk from the conflict.

Israel said it has taken control over much of Iran’s airspace and severely damaged key facilities used in its missile and nuclear programs since the assault was launched on Friday, sparking fears of widening conflict in a region that produces around a third of the world’s crude.

“There might be growing hopes that a slow but irreversible de-escalation will follow soon, but it is simply impossible to foretell the outcome with great confidence,” said Tamas Varga, an analyst at brokerage PVM. “In the Israel-Iran war, the completion of the geopolitical cycle might take longer than just a few days.”