Oil prices gain 3% after Reuters report signals complication to US-Iran peace talks

NEW YORK - Oil prices were up 3% on Thursday after Reuters reported that Iran's Supreme Leader has issued a directive that the country's near-weapons-grade uranium should not be sent abroad, denting hopes for a swift resolution to the U.S.-Israeli war on Iran.

The report, citing two senior Iranian sources, signaled that Tehran is hardening its stance on a key U.S. demand. The directive from Ayatollah Mojtaba Khamenei could further complicate negotiations and frustrate U.S. President Donald Trump's efforts to broker an end to the war.

Brent crude futures gained $3.07, or 2.9%, to $108.09 a barrel at 11:12 a.m. EDT (1512 GMT). U.S. West Texas Intermediate futures rose $3.52, or 3.6%, to $101.78. Both were trading lower before the report.

The development came a day after Iran's announcement of a new "Persian Gulf Strait Authority," which would oversee a "controlled maritime zone" in the Strait of Hormuz.

Prices were volatile. Gains accelerated after U.S. Secretary of State Marco Rubio said a proposed tolling system in the Strait of Hormuz would make a diplomatic deal unfeasible. Prices pared gains later after he added that officials from Pakistan, which is acting as a mediator, will travel to Iran for talks.

Pakistan stepped up diplomatic efforts to hasten the U.S.-Iran peace talks, as Tehran said it was reviewing Washington's latest responses. Trump suggested he could wait a few days for "the right answers" from Tehran but was also willing to resume attacks on the country.

"We've been in this situation multiple times before, which ultimately led to disappointment," ING analysts said in a note on Thursday, forecasting an average Brent price of $104 a barrel in the current quarter. Separately, UBS raised its oil price forecasts by $10 a barrel on Thursday, projecting Brent crude at $105 a barrel and U.S. West Texas Intermediate (WTI) crude at $97 in September.

Iran warned against further attacks and unveiled steps entrenching its control of the Strait of Hormuz, which remains mostly closed. Before the war the strait carried oil and liquefied natural gas shipments equal to about 20% of global consumption.

Economic activity in the euro zone shrank at its sharpest rate in more than 2-1/2 years in May as a war-driven surge in living costs hammered demand for services across Europe and firms accelerated layoffs, surveys showed on Thursday.

Seven leading OPEC+ oil-producing countries will likely agree to a modest hike in July output when they meet on June 7, Reuters reported on Thursday, citing four sources. Typically, output decisions from the group would move markets, but that was not the case during Thursday's session, as supply disruptions linked to the Iran war continue to affect deliveries from several producers.

DRAWDOWNS IN STOCKPILES

The start of peak summer fuel demand combined with the lack of new oil exports from the Middle East and depleting stocks could push the oil market into the "red zone" in July-August, International Energy Agency head Fatih Birol said on Thursday.

Even if the Middle East conflict ended now, full oil flows through the Strait of Hormuz will not return before the first or second quarter of 2027, Sultan Al Jaber , the CEO of Abu Dhabi National Oil Company (ADNOC) said.

Iran effectively closed the strait in response to the U.S. and Israeli attacks that started the war on February 28. Most of the fighting has stopped since an April ceasefire, but while Iran is limiting traffic through Hormuz, the U.S. has blockaded its coastline.

Supply losses from the key Middle Eastern producing region because of the war have forced countries to tap their commercial and strategic inventories at a rapid rate, raising concerns about draining them.

The U.S. Energy Information Administration said on Wednesday the country withdrew nearly 10 million barrels of oil from its Strategic Petroleum Reserve last week for its biggest drawdown on record. U.S. crude inventories also fell by more than expected last week, according to EIA data.

(Reporting by Siddharth Cavale in New York, Stephanie Kelly in London, Sam Li in Beijing and Siyi Liu in Singapore; Editing by Gus Trompiz, Kirsten Donovan and David Gregorio)

Copyright Reuters or USA Today Network via Reuters Connect.

This story was originally published May 21, 2026 at 9:11 AM.