Iranians gather outside the Imam Khomeini Mosalla Mosque in Tehran, during an event to commemorate those killed in the current U.S.-Israeli war as well as previous wars on Sunday.Majid Saeedi/Getty Images
Hopes that the Strait of Hormuz would reopen in the next week or two faded on Tuesday after the U.S. launched overnight attacks on Iran, highlighting the fragility of the peace talks aimed at ending the three-month war. Oil prices shot back up again.
The attacks came even as U.S. President Donald Trump signaled that talks with Iran aimed at reopening the Strait of Hormuz, which has been almost entirely blocked since the start of March, were “proceeding nicely!” He added that: “It will only be a Great Deal for all or no Deal at all.”
In a statement, U.S. Central Command said American warplanes hit Iranian missile-launch sites and boats trying to lay mines in the narrow Hormuz waterway, through which 20 per cent of the world’s oil and liquefied natural gas passed before the U.S. and Israel attacked Iran on Feb. 28. Hormuz was fully open before then.
“U.S. forces conducted self-defence strikes in southern Iran today to protect our troops from threats from Iranian forces,” Central Command spokesman Tim Hawkins said late Monday.
Oil prices jump as U.S. military strikes on Iran add to peace deal uncertainty
The attacks reversed the course of oil prices. Brent crude, the international benchmark, was up by 3.2 per cent, to more than US$99 a barrel in mid-afternoon London trading.
A day earlier, Brent had fallen 6 per cent on investors’ optimism that Hormuz would soon re-open and restore oil and LNG flows to energy starved economies. The FTSE-100 index was up less than 0.5 per cent on Tuesday. Germany’s DAX was down by about by the same amount.
Iran’s Revolutionary Guard said it shot down a U.S. Reaper drone. Several Iranian personnel were killed in the attacks on vessels near the small Larak Island in the middle of the strait, Iran’s state-run Nour News reported. Israel did not take part in the attacks, its military said.
In spite of the attacks, the White House insisted that the peace talks remained in progress.
Speaking from Jaipur, India, U.S. Secretary of State Marco Rubio said: “We’ll see if we can make progress. I think it’s a lot of talking back and forth going on about specific language in the initial document, so it’ll take a few days … The straits have to be open, they’re going to be open one way or the other.”
He gave no details about the sticking points.
Rubio said Tuesday that a deal with Iran could still be days away, tempering hopes for a swift end to the conflict.
Reuters
On Monday, Tehran said that progress in the peace talks was being made, but that a deal was not certain. “It is correct to say that we have reached a conclusion on a large portion of the issues under discussion,” said Esmaeil Baghaei, a spokesman for Iran’s Foreign Ministry. “But to say that this means the signing of an agreement is imminent, no one can make such a claim.”
Mr. Baghaei said that Iran is negotiating an end to the war and that nuclear issues are not on the table at this stage. Iran also wants a permanent ceasefire in Lebanon between Iran-backed Hezbollah guerrillas and Israel.
Israel has invaded southern Lebanon to try to destroy Hezbollah’s ability to launch rockets into Israel. Israeli Prime Minister Benjamin Netanyahu said on Monday that Israel will intensify its attacks on Hezbollah. “We are at war with Hezbollah,” he said in a video message. “We are not taking our foot off the gas.”
Israeli attacks on Lebanon have killed 3,000 people since early March, according to Lebanon’s Ministry of Public Health.
Black smoke rises following an Israeli air strike which reportedly hit a gas station in the village of al-Mansouri, in the Tyre District of southern Lebanon on Monday.KAWNAT HAJU/AFP/Getty Images
The memorandum of understanding under negotiation by the U.S. and Iran would see Iran restore shipping through Hormuz and delay talks over nuclear issues until one or two months after the initial agreement is in place.
Mr. Trump has said that his primary goal is to prevent Iran from developing a nuclear weapon. He wants Iran’s supplies of enriched uranium to be destroyed. In earlier talks, Iran has said it is willing to dilute the purity of its enriched uranium but would not permit the transfer of the stockpile outside of the country. Russia, a de facto ally of Iran, has offered to take the enriched fuel.
On Monday, in an apparent concession to Iran, Mr. Trump used social media to say that the fuel could be “destroyed” inside the country as long as the process is overseen by an international nuclear agency, an apparent reference to the International Atomic Energy Agency.
Analysis: Along with peace prospects, Trump suffers a series of defeats
The U.S. and Iran negotiated a ceasefire on April 8. But only a few oil tankers and LNG carriers have made it through Hormuz since then. Since the start of the war on Iran, oil has mostly traded above US$100; Brent at one point breached US$126, sending fuel prices around the world soaring.
Earlier this month, high fuel prices triggered deadly protests in Kenya. The cost of gasoline and diesel has climbed by 50 per cent or more in many sub-Saharan countries.
In the U.S., average diesel prices are up by more than US$2 a gallon in the past year, according to the AAA Fuel Prices monitor, with almost all the increase coming since the U.S. and Israel started attacking Iran. Regular gasoline has climbed by 40 per cent to about US$4.50 a gallon.
The high energy costs are stoking inflation. In the U.S., annual inflation rose to 3.8 per cent in April, outpacing the increase in average earnings over the year. Rising inflation in the eurozone countries “should leave little doubt over a June ECB hike,” the French bank Société Générale said in a Tuesday note, referring the European Central Bank.