Iran suspended negotiations with the United States on June 1 and announced plans to completely block the Strait of Hormuz, according to Xinhua News Agency citing Iranian media reports from a source close to the negotiating team. The suspension was triggered by Israel's continued military operations in Lebanon and Gaza. The already fragile US-Iran negotiations, which had been conducted through intermediaries, now face a critical impasse as Tehran demands Israel immediately halt all military actions and withdraw from Lebanon before any talks resume.
Iranian officials and negotiators stated that Israel must immediately stop military operations in Lebanon and Gaza and withdraw from Lebanese territory. Iran will not hold any negotiations until these demands are met. As an "option to punish Israel and its supporters," Iran and the "resistance front" plan to "completely block the Strait of Hormuz" and "launch operations on other fronts such as the Bab el-Mandeb Strait."
Oil and Gold Prices React to Iran Announcement
The latest statements intensified market concerns, driving international oil prices sharply higher. US crude surged 8% intraday and Brent rose over 7% before paring some gains. As of Monday's close, New York Mercantile Exchange July WTI crude futures closed at $92.16 per barrel, up 5.49% on the day; London Brent crude futures for August delivery closed at $94.98 per barrel, up 4.24%.
Rising oil prices fueled inflation concerns and heightened market expectations for Federal Reserve rate hikes, pushing international gold prices below the $4,500 mark again. COMEX June gold futures fell 1.87% to close at $4,475.2 per ounce; COMEX June silver futures fell 0.81% to close at $75.007 per ounce.
Trump Responds to Iran Suspension Report
US President Trump stated on the same day that he had not yet received information from Iran regarding the suspension of negotiations with the United States, and that the US would continue to enforce a blockade on Iranian ports. He subsequently posted on social media that he had communicated separately with Israel and Hezbollah in Lebanon, stating that Israel would not send troops to Beirut and that Hezbollah had agreed to a ceasefire, and that negotiations with Iran were "moving forward rapidly." Regarding when a memorandum of understanding to reopen the strait could be completed and agreed upon, Trump told US media: "I think probably within the next week." However, he said he had not yet agreed to the memorandum because he "still needs to secure a few conditions."
After Trump's remarks aimed at cooling Middle East tensions, the three major US stock indices turned positive intraday and continued to hit new highs. The Dow Jones Industrial Average closed up 0.09%, the S&P 500 index rose 0.26%, and the Nasdaq rose 0.42%.
Iran Foreign Ministry Issues Official Statement
Iran's Foreign Ministry issued a statement on June 1 condemning the continued violations of ceasefire agreements by the United States and Israel. The statement emphasized that any breach of ceasefire on any front means a violation of the overall ceasefire arrangement, and stated that Iran would "use all capabilities to defend its interests" when necessary.
Energy Agencies Warn of Accelerating Inventory Decline
Over nearly two months, the fragile "ceasefire" between the US and Iran has faced constant variables and a difficult-to-resolve stalemate. Beyond the uncertain direction of military operations, risks of accelerating depletion of global crude oil inventories continue to accumulate.
International Energy Agency Executive Director Fatih Birol stated during the G7 finance ministers' meeting in Paris, France, that commercial oil inventories are "declining sharply" due to Middle East conflicts, with remaining supplies lasting "only weeks." Monthly petroleum data released by the IEA showed that global crude oil and refined product inventories decreased by an average of nearly 4 million barrels per day in April, a scale exceeding the combined oil consumption of the UK and Germany, with buffer inventories used by countries to counter supply shocks facing depletion risk.
For over two months, oil industry executives have been issuing warnings that crude oil futures markets do not truly reflect the extent of disruption caused by Middle East conflicts.
Neil Chapman, Senior Vice President of ExxonMobil, the largest US oil company, stated at a conference on May 28 that after the outbreak of Middle East conflicts, national oil inventories and strategic reserve releases by multiple countries temporarily mitigated the impact of the largest supply disruption in history, but this "cannot continue forever," with commercial inventories of crude oil, gasoline, diesel, and jet fuel all declining rapidly.
He stated that oil inventory levels are approaching unprecedented lows. Brent crude inventories will fall to historic lows in the coming weeks, which will force spot oil prices to surge to $150 to $160 per barrel. "When prices reach a certain level, demand decline will restore supply-demand balance."
Goldman Sachs previously calculated global crude oil inventories, including national commercial inventories and strategic reserves, with results showing that total inventories as of the end of April stood at 101 days of demand, potentially declining to 98 days by the end of May. For refined products, global inventories could meet 50 days of demand before the outbreak of Middle East conflicts, but now can only meet 45 days of demand. Even if navigation through the Strait of Hormuz begins to resume soon, it will take at least several weeks to return to normal, with inventories expected to decline further before the end of June.
Goldman Sachs stated in a May 20 report that global crude oil and refined product inventories are declining at a record pace, with daily average reductions reaching 8.7 million barrels since May, more than double the average destocking rate since the outbreak of Middle East conflicts, reaching the highest level in history.
FAQ
What did Iran announce on June 1 regarding US negotiations?
Iran suspended negotiations with the United States conducted through intermediaries and announced plans to completely block the Strait of Hormuz, according to Xinhua News Agency citing Iranian media reports from a source close to the negotiating team. Iran stated it will not hold any negotiations until Israel immediately stops military operations in Lebanon and Gaza and withdraws from Lebanese territory.
How did oil and gold prices react to Iran's announcement?
WTI crude futures closed at $92.16 per barrel, up 5.49%, while Brent crude closed at $94.98 per barrel, up 4.24%. COMEX June gold futures fell 1.87% to $4,475.2 per ounce, and COMEX June silver futures fell 0.81% to $75.007 per ounce, as rising oil prices intensified inflation concerns and expectations for Federal Reserve rate hikes.
What warnings have energy agencies issued about global oil inventories?
International Energy Agency Executive Director Fatih Birol stated that commercial oil inventories are declining sharply with remaining supplies lasting only weeks. Goldman Sachs calculated that global crude oil inventories stood at 101 days of demand at the end of April, potentially declining to 98 days by the end of May, with daily average reductions reaching 8.7 million barrels since May.
