• Oil prices reversed early losses after an Iranian source said no ceasefire discussions are underway, maintaining geopolitical risk premium.
  • Market focus remains on Strait of Hormuz supply risks as traders weigh diplomatic signals.
  • Volatility expected to persist with any hint of a potential ceasefire or escalation.

Crude Reverses Course

Brent crude futures and West Texas Intermediate (WTI) erased earlier declines on Thursday, climbing back into positive territory after Reuters cited an Iranian source stating that no discussions on a ceasefire with the U.S. are currently taking place. The report dashed hopes among traders that a de-escalation in Middle East tensions might ease supply concerns, keeping the risk premium firmly intact.

At 10:45 a.m. ET, Brent for June delivery was up 0.8% at $87.45 a barrel, while WTI for May delivery gained 0.9% to trade at $82.90. Earlier in the session, both benchmarks had slipped by more than 1% on speculative chatter about potential diplomatic progress.

Geopolitical Jitters Persist

The market's reaction underscores the delicate balance between geopolitical risk and supply fundamentals. The Strait of Hormuz, through which about 20% of global oil flows, remains a flashpoint, with any disruption threatening to tighten supplies significantly. Traders are now bracing for continued volatility, as the lack of dialogue raises the specter of further escalation.

"The market is on edge, and any news—or lack thereof—on the diplomatic front is causing sharp swings," said James Harte, an energy analyst at a London-based brokerage. "Without a deal, the possibility of supply disruptions remains a real overhang."

Efforts to reach a ceasefire have been reported in various media, but the Iranian source's denial dashes those hopes for now. A spokesperson for Iran's mission to the United Nations did not immediately respond to requests for comment.

Oil Markets on Tenterhooks

The latest repricing highlights the market's sensitivity to headlines. Just a day earlier, Brent had dropped nearly 3% on unfounded rumors of an imminent truce. Now, with those rumors quashed, the focus shifts back to actual supply risks.

"It's a classic case of 'buy the rumor, sell the fact'—or in this case, sell the rumor, buy the reality that there's no progress," noted Rebecca Chen, a commodities strategist at a Singapore-based trading firm.

Adding to the complexity, U.S. crude inventories rose by 3.2 million barrels last week, according to the Energy Information Administration, exceeding analyst expectations. Yet geopolitical risks are overriding such bearish signals, at least in the short term.

What's Next?

Traders will be closely monitoring any diplomatic signals from Washington or Tehran. A resumption of talks could quickly unwind the risk premium, while a further escalation could push prices decisively higher. Until then, expect two-way volatility to remain elevated, with headlines dictating price action.

Correction: An earlier version of this article misstated the time of the price data. It has been updated to reflect the most recent figures.