International oil prices moved higher on Thursday as traders closely tracked a key meeting between Donald Trump and Xi Jinping, with hopes that talks could influence the ongoing Iran conflict and ease pressure on global supply.
Brent crude rose by 26 cents to $105.89 a barrel, while US West Texas Intermediate gained 32 cents to reach $101.34 in early trading. The modest increase followed a sharp decline a day earlier, when both benchmarks fell on concerns that rising fuel costs could lead to higher US interest rates and slow demand.
Markets in wait and watch mode
The meeting in Beijing is expected to cover a wide range of issues, including trade tensions, the Iran war and US arms sales to Taiwan. However, the conflict in the Middle East remains the key concern for oil markets.
Analysts say there is limited optimism that China will take a strong stance. Beijing has long maintained close ties with Tehran, making it unlikely to apply significant pressure.
Market participants appear cautious. Analysts note that traders may be placing too much hope on a diplomatic breakthrough that could quickly stabilise supply.
Strait of Hormuz remains a major concern
The situation around the Strait of Hormuz continues to weigh heavily on sentiment. The vital shipping route has been largely closed since fighting escalated in late February, disrupting the flow of crude from the region.
There are growing fears that if the strait does not reopen soon, tensions could rise further. Some analysts warn that the US may have limited options left if diplomatic efforts fail.
Iran has also tightened its grip over the route, while exploring alternative export arrangements with regional partners such as Iraq and Pakistan.
A rare movement of oil was seen this week when a Chinese supertanker carrying Iraqi crude managed to pass through the strait after being stranded for more than two months. It marked only the third such shipment since the conflict began.
Supply outlook turns tighter
The global oil balance is now expected to tighten more than previously thought. The International Energy Agency has revised its outlook, warning that supply may fall short of demand this year.
The agency said the ongoing conflict has severely affected production in the Middle East while drawing down global inventories at an unusually fast pace.
With uncertainty still high, oil markets are likely to remain sensitive to both political developments and supply disruptions in the coming weeks.
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