Oil Surges As Trump Doubts Success In Iran Talks, Non-Essentials Evacuated From Baghdad

Oil also gained with news of a U.S./China pact: File Image/Pixabay

U.S. president Donald Trump's disclosure on Wednesday that it's unlikely Washington and Tehran will reach a nuclear deal – along with non-essential American personnel preparing to evacuate its embassy in Baghdad – caused crude prices to surge over 4 percent.

The tensions were kindled by the United Kingdom Maritime Trade Operations warning of increased tensions in the region that could lead to an "escalation of military activity."

Trump told media that "They seem to be delaying, and I think that's a shame, but I'm less confident now than I would have been a couple of months ago….something happened to them, but I am much less confident of a deal being made."

He added that the U.S. will prevent Iran from developing a nuclear weapon, "but it would be nicer to do it without warfare, without people dying."

In response, Aziz Nasirzadeh, Iran's defense minister, said Tehran will strike U.S. bases in the Middle East if the talks fail and conflict arises.

As a result of the sabre-rattling, Brent on Wednesday settled up $2.90 to $69.77 per barrel, and West Texas Intermediate settled up $3.17 to $68.15.

Rebecca Babin, a senior energy trader at CIBC Private Wealth Group, said of the trading, "While geopolitical rallies are often seen as selling opportunities, this situation carries the added complexity of potential Israeli military action if negotiations break down, which is keeping traders more cautious about selling into the rally."

Oil began to rise earlier in the session upon news that Washington and Beijing have agreed to a trade deal; that along with a soft inflation report stoked optimism about demand.

But Peter Andersen, founder of Andersen Capital Management, said, "Given such uncertainty in the markets right now, we tend to defer being negative when we can't understand this stuff.

"There's a handshake deal, but it's a long way off from an actual deal."

In other oil news on Wednesday, The Moscow Times reported that combined net profits of Russia's oil and gas companies nearly halved in the first quarter from a year earlier, partly due to the Western sanctions , the stronger Russian ruble, and the drop in oil prices.