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(Bloomberg) — Oil rallied as traders braced for any escalation to US-Iran tensions heading into the weekend after President Donald Trump signaled he was “not happy” with negotiations aimed at averting an imminent US attack.
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West Texas Intermediate jumped 2.8% to close above $67 a barrel, its highest settlement since August. Trump urged Iran to make a deal over its nuclear program after griping that it wasn’t negotiating in good faith, adding that there would be “additional talks today” after the two sides failed to reach an agreement in Geneva earlier this week. Meanwhile, the US, China and several other nations advised citizens to leave some parts of the region.
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“They cannot have nuclear weapons, and we’re not thrilled with the way they’re negotiating,” Trump told reporters at the White House.
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Concerns about a potential US strike on Iran have helped oil prices jump more than 15% so far this year, offsetting broad expectations of a supply glut. The market has been on edge as Trump has ordered the largest US military buildup in the region since the 2003 invasion of Iraq, giving the Islamic Regime limited time to strike a deal.
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“President Trump has a personal, strong aversion to nuclear weapons, especially coming into the hand of Iranians, more so than any predecessors, and it’s almost more important than his aversion to high oil prices,” Bob McNally, president of Rapidan Energy Group, said in a live briefing on Thursday.
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Odds of a US strike on Iran by March 1 surged on Friday, according to the Polymarket prediction markets site. They were at roughly 26% by 3 p.m. in New York, compared with 9% at the start of the trading session.
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Disagreement over Iran’s uranium-enrichment capabilities also heightened concerns about potential US military action ahead of the weekend, traders said. United Nations atomic inspectors found that Iran is conducting regular and unexplained activity at bombed uranium-enrichment sites.
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Freight rates have climbed in recent days, driven by a major Korean shipowner’s bullish tanker bet and geopolitical tensions. Traders are watching for how tensions could impact Iranian oil flows as well as shipping through the Strait of Hormuz, a narrow passage separating Iran and the Arabian peninsula.
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“Iran has the capability to make Hormuz unsafe for commercial passage for a time measured in weeks, not hours or days,” Rapidan’s McNally added.
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Two shipping companies said on Friday that they’re rerouting vessels to sail south of Africa instead of transiting the Red Sea and Suez Canal. Traffic through the key corridor remains vulnerable to attacks by Yemen-based Houthi militants, an Iran-backed group that has targeted ships in the Red Sea.
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This weekend, traders will also be closely watching a scheduled OPEC+ supply meeting on Sunday, as conflict risks cloud the outlook.
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“OPEC+ is likely to increase oil production only slightly from April onwards, but geopolitical risks mean that there is unlikely to be any pressure on prices — for the time being,” according to a report from Commerzbank.
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—With assistance from Alex Longley and Nicholas Lua.
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