Oil prices rose in early Asian Friday on doubts that the Strait of Hormuz will reopen soon, renewing concerns over supply disruptions in the Middle East.
Arab mediators working on a deal with Tehran to reopen the Strait of Hormuz said they fear Iran's diplomats, who are under pressure from the country's hard-liners, lack the clout to guarantee compliance even if an agreement is reached.
Mediators said the main negotiators, Foreign Minister Abbas Araghchi and Parliamentary Speaker Mohammad Bagher Ghalibaf, swiftly embraced a recent plan to divide traffic through the Strait of Hormuz into an inbound lane near Iran and an outbound lane near Oman. The Strait is a key waterway through which one-fifth of the world's oil is transported.
However, the Islamic Revolutionary Guard Corps, which exerts control over the waterway, pressed for the right to charge fees for transits and to seek more explicit assurances that the U.S. will lift its blockade and sanctions on oil sales, according to the mediators.
Front-month West Texas Intermediate crude oil futures rose 1.1% to $78.17 per barrel and front-month Brent crude oil futures gained 1.3% to $83.56 a barrel, ICE data showed.
"Geopolitical risk remains elevated," UOB's Global Economics & Markets Research team said in a research report. "The Iran-Oman Strait of Hormuz deal remains unresolved," the team said, citing Iranian media reporting that any agreement would bar U.S. and Israeli vessels and require compensation from "hostile" nations. These are "terms that appear far less acceptable to Washington than initial headlines suggested," the team added.
Equity markets across Asia were mostly lower, tracking Wall Street's declines overnight.
"Wall Street posted a corrective move," said Antonio Di Giacomo, senior market analyst at XS.com, in an email. "Investors chose to lock in part of the gains accumulated over recent sessions amid increased uncertainty driven by the rebound in oil prices and anticipation ahead of the release of the U.S. nonfarm payrolls report," he said.
This report is "one of the most important economic indicators for assessing the strength of the labor market and the outlook for Federal Reserve monetary policy," the analyst added.
Japan's Nikkei Stock Average dropped 0.6% and Australia's S&P/ASX 200 benchmark index shed 0.4%. South Korea's Kospi rose 0.5% after swinging between mild gains and losses.
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