US, Iran may resume war talks this week despite port blockade

Negotiating teams from the US and Iran could return to Islamabad this ​week to resume talks to end the war, sources told Reuters on Tuesday, after the collapse of weekend negotiations prompted Washington to impose a blockade on Iranian ports.

While ‌the US blockade drew angry rhetoric from Tehran, signs that diplomatic engagement might continue helped calm oil markets, pushing benchmark prices below $100 on Tuesday.

The highest-level talks between the two adversaries since the 1979 Islamic Revolution ended in Islamabad without a breakthrough at the weekend, raising doubts over the survival of a two-week ceasefire that still has a week to run.

But a source involved in the talks said on Tuesday both countries could return as early as the end ​of this week, and that a proposal had been shared with Washington and Tehran to resend their delegations. "No firm date has been set, with the delegations keeping Friday through ​Sunday open," a senior Iranian source said.

A US official said there was continued engagement and ‌forward motion on trying to get to an agreement. Prime Minister Shehbaz Sharif also said efforts were still underway to resolve the conflict.

US President Donald Trump said Iran had been in touch on Monday and wanted to make a deal, ⁠adding that he would not sanction any agreement that allowed Tehran to possess a nuclear weapon.

Read More: Iran warns it will 'return to war' if Strait of Hormuz control not recognised

Vice President JD Vance, who led Washington's delegation opposite Iran's speaker of parliament, Mohammad Baqer Qalibaf, told Fox News on Monday the US had "made a lot of progress" by communicating to Tehran where Washington "could make some accommodation" and where it would remain inflexible.

He said Trump was adamant that any enriched nuclear material must be removed from Iran and a mechanism must be established to verify that Iran is not developing nuclear weapons.

Tehran "moved in our direction, which is why I think we would say that we had some good signs, but they didn't move far enough," Vance said, ​without disclosing further details.

Since the United States and Israel began the war on February 28, Iran effectively shut the Strait ​of Hormuz to all vessels except its own, saying passage would be permitted only under Iranian control and subject to a fee. The fallout has been widespread, as nearly a fifth of the ​world's oil and gas previously flowed through the narrow waterway.

In a countermeasure, the US military began blocking shipping traffic in and out of Iran's ports on Monday. Tehran has threatened to hit naval ships going through the strait and to retaliate against its Gulf neighbours' ports.

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Meanwhile, Shipping data on LSEG showed Chinese-owned oil-and-chemicals tanker Rich ​Starry passed through the strait on Tuesday - the first since the US blockade began at 10am EDT (1400 GMT) on Monday. The vessel, which departed Sharjah anchorage off the coast of Dubai on Monday heading for China, had ​earlier turned back minutes after approaching the strait.

The US's blockade has further clouded the outlook for global energy security and the supply of a vast array of goods that rely on petroleum, and has little, if any, international backing.

NATO allies, including Britain and France, said they would not be drawn into the conflict by taking part in the blockade, stressing instead the need to reopen the waterway.

Oil prices slip as hopes of US-Iran talks ease supply fears

Oil prices fell on Tuesday in Asian trade, ​as concerns about supply risks stemming from the US blockade of the Strait of Hormuz were allayed by signs of ‌possible talks to end the US-Iran war.

Brent futures declined 76 cents or 0.8%, to $98.57 by 0601 GMT, while US West Texas Intermediate (WTI) crude fell $1.63, or 1.65%, to stand at $97.45.

Both benchmarks had risen in the previous session, with Brent climbing more than 4% and WTI nearly 3%, after the US military began a blockade of Iran's ports. Oil ​prices rose 50% last month, a historic record.

The US military said on Monday its blockade of the Strait of Hormuz would extend ​east to the Gulf of Oman and Arabian Sea, while ship-tracking data showed two ships turned around in the ⁠Strait as the blockade started.

Iran threatened in response to target ports in nations bordering the Gulf, following the collapse of weekend talks in ​Islamabad aimed at resolving the crisis over the Strait, usually a conduit for about a fifth of global oil and gas supplies.

Read More: China rejects accusations of supplying weapons to Iran

Investors banked on a resolution to the Middle East war even as the US blocked Iran's ports after the talks collapsed.

ANZ analysts estimate that the supply of about 10 million barrels ​per day of crude supply has ​effectively been removed from the market, ⁠while a prolonged US blockade could curb an additional 3 million to 4 million bpd of crude shipments.

"The oil market no longer needs a worst-case escalation to justify higher pricing," ANZ added in a client note. "Tight ​balances alone are sufficient to sustain the price of Brent near or above recent threshold levels."

NATO allies, such ​as Britain and ⁠France, refrained from joining the blockade, calling instead for the vital waterway to reopen.

US Energy Secretary Chris Wright suggested oil prices could peak in "the next few weeks" once shipping resumed.

The International Monetary Fund, the World Bank, and the International Energy Agency warned against hoarding energy supplies or adopting export curbs, amid a shock to the ⁠global market ​that they described as the most significant ever.

On Monday, IEA chief Fatih Birol said that ​while further strategic oil releases might not yet be necessary, the agency remains prepared to act if needed.

The Organisation of the Petroleum Exporting Countries scaled back its second-quarter global demand forecast ​by 500,000 bpd in its latest monthly report.

Ceasefire still holding

With the war ​unpopular at home and rising energy prices ⁠causing political blowback, Trump paused the US-Israeli bombing campaign last week after threatening to destroy Iran's "whole civilisation" unless it reopened the strait.

The ceasefire, which halted U.S.-Israeli strikes and fire from Iran across the Gulf in response, has largely held over its first week despite sharp rhetoric from both sides.

An Iranian ​military spokesperson called any US restrictions on international shipping "piracy," warning that if Iranian ports were threatened, no port in the Gulf or Gulf ​of Oman would be secure. ⁠Any military vessels approaching the strait would violate the ceasefire, Iran's Revolutionary Guards said.

Also read: 'Draft was ready': how US-Iran talks narrowly missed historic deal in Islamabad

Trump said Iran's navy had been "completely obliterated" during the war, adding that only a small number of "fast-attack ships" remained.

"Warning: If any of these ships come anywhere close to our BLOCKADE, they will be immediately ELIMINATED, using the same system of kill that we use against ​the drug dealers on boats at Sea. It is quick and brutal," Trump said on social media.

The US military's Central Command said the blockade would be enforced against vessels entering or leaving Iranian ⁠ports in the ​Gulf and Gulf of Oman. It would not impede neutral transit passage through the Strait of Hormuz to or ​from non-Iranian destinations, it said in a note to seafarers seen by Reuters.

Three Iran-linked tankers were seen transiting the Strait of Hormuz on the first full day of the US blockade on Tuesday, shipping data showed. As the vessels were not heading ​to or from Iranian ports, they were not covered by the blockade.

Lebanon faces attacks

With the war unpopular at home and rising energy prices causing political blowback, Trump paused the US-Israeli bombing campaign last week after threatening to destroy Iran's "whole civilisation" unless it reopened the strait.

In a letter to the United Nations, Iran's UN delegation on Monday asked for reparations from ⁠Saudi Arabia, ​the UAE, Bahrain, Qatar and Jordan, alleging they have allowed their territory to be used in the US-Israeli war against Iran.

Israel has ​continued to bombard Lebanon and on Monday, troops launched an attack it said was intended to seize a key south Lebanon town from Iran-backed Hezbollah. The Israeli military said on Tuesday that an Israeli soldier was killed and three reservists were wounded during combat in southern Lebanon.

Israel ​and the US have said the campaign against Hezbollah was not part of the ceasefire, while Iran has insisted it is.