(Investing) – Oil prices climbed on Tuesday, extending gains of nearly 3% in the previous session, after U.S. President Donald Trump said a fragile ceasefire with Iran was on “life support,” denting hopes for an imminent peace agreement.
As of 09:46 ET (13:46 GMT), , the global oil benchmark, rose 3.6% to $107.96 a barrel, while advanced 3.5% to $101.52 a barrel.
Market sentiment remained dominated by fears that the more than two-month old war in the Middle East could further tighten global supply, particularly after Trump rejected Tehran’s latest response to an American peace proposal, calling it “totally unacceptable.” He described Tehran’s reply as “a piece of garbage,” adding that the truce was now at its weakest point.
Iran defended its position on Monday, saying its counteroffer was focused on ending the war, lifting an ongoing U.S. naval blockade, and restoring shipping traffic through the Strait of Hormuz. Tehran has also demanded compensation for war damage, removal of sanctions, and recognition of its sovereignty over the strait.
A CNN report late Monday said Trump is seriously considering resuming major combat operations against Iran as peace negotiations dithered.The comments renewed concerns over the future of shipping through the Strait of Hormuz, a vital chokepoint through which roughly one-fifth of global oil and fuel supply passes.
Saudi Aramco Chief Executive Amin Nasser warned this week that even if the waterwayreopened immediately, it could still take months for global oil flows to normalize. Oil retreated temporarily last week on expectations that Washington and Tehran may be moving closer to a diplomatic breakthrough, but those hopes have since largely faded.
Traders await U.S. CPI data, Trump-Xi meeting
Investors are also closely watching U.S. inflation data. Headline U.S. consumer prices rose by more than anticipated on an annualized basis in April, driven in large part by a sharp — albeit cooling — jump in gasoline prices.
Analysts have been keeping close tabs on incoming inflation figures as they attempt to parse out the effect of an energy shock sparked by the Iran war and the path ahead for Federal Reserve interest rate policy. The Fed is widely tipped to keep borrowing costs unchanged for the time being, especially with officials keen not to roil the labor market following recently strong employment gains last month.
U.S. producer prices figures due on Wednesday are also expected to show mounting price pressures from higher gasoline and transportation costs.
At the same time, traders are looking ahead to Trump’s meeting with Chinese President Xi Jinping in Beijing later this week, where discussions are expected to include Iran, trade, artificial intelligence and global energy security.
Analysts said the talks could play a key role in determining the direction of the Iran conflict because China remains Iran’s largest oil buyer and retains significant diplomatic leverage with Tehran.
