Crude Oil Prices Continue Rally Amid Ongoing US-Iran Diplomatic Tensions

US-Iran War Escalation Sends Oil Prices Soaring

Oil prices continued their upward trajectory on Tuesday, 12 May, as US President Donald Trump raised doubts over a ceasefire with Iran by rejecting Tehran's latest peace proposal, effectively shutting down the crucial Strait of Hormuz.

Brent crude traded near $105 a barrel, a 2.9% gain from the previous session, while West Texas Intermediate hovered near $99. Back home, crude oil prices on the Multi Commodity Exchange (MCX) also witnessed a similar upward movement, rising nearly 1% to ₹9,449 per barrel.

The key driver behind the surge in crude oil prices is the ongoing US-Iran conflict. Trump, on Monday, stated that the ceasefire with Iran was "hanging by a thread," citing differences over several key demands, including a complete halt to hostilities across all fronts, lifting of the US naval blockade, resumption of Iranian oil exports, and compensation for damages caused by the conflict.

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A truce has been in effect since early April and has largely held despite recent flare-ups, including attacks on ships. The near shutdown of the Strait of Hormuz has severely disrupted global supplies of crude oil, natural gas, and fuels, fueling fears of a fresh inflationary shock.

According to a Bloomberg report, Iran responded to Trump's peace proposal by seeking the removal of the US naval blockade and sanctions relief, while also insisting on retaining some control over traffic passing through the Strait of Hormuz.

The conflict is expected to be a key topic when US President Donald Trump meets Chinese President Xi Jinping this week, with US officials indicating that Trump will raise concerns over China's stance on Iran, according to the Bloomberg report. Meanwhile, the US Treasury Department on Monday imposed fresh sanctions on additional entities accused of facilitating Iranian oil sales to China, the largest importer of Tehran's crude.

Crude Oil Prices Outlook

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According to a report by Bloomberg, crude oil prices are likely to remain above $100 until a US-Iran peace deal is finalized. This is due to the ongoing restrictions on physical flows through the Strait of Hormuz, which is expected to continue until a resolution is reached.

Oil Price Comparison

On the technical front, Ponmudi R, CEO of Enrich Money, stated that MCX crude oil opened with a sharp gap up and is trading above the ₹9,500 zone, reclaiming key resistance levels on the back of escalating geopolitical tensions. A sustained hold above ₹9,600 could extend the rally toward ₹9,800–₹10,000, with further upside possible should conditions deteriorate further. On the downside, ₹9,200 acts as immediate support; a break below this level could extend losses toward ₹9,000–₹8,800. The near-term bias has turned bullish, although price action remains highly sensitive to headline-driven developments surrounding the Strait of Hormuz.