Oil prices increased slightly on May 19 following a breakdown in talks between the US and Iran over Iran’s nuclear programme, with Brent crude futures lying 13 cents higher at $65.54 per barrel and US West Texas Intermediate crude climbing by 20 cents to $62.69 per barrel, according to Reuters.

Unpredictability in the crude market is likely to continue, with Iran’s deputy foreign minister Majid Takht-Ravanchi noting that nuclear talks would go nowhere if the US continued to insist that Tehran halts its uranium enrichment programme.

The minister’s comments have pushed the possibility of a deal further down the line, despite a potential agreement meaning Iran would have sanctions eased – resulting in an increase of oil exports by between 300,000 to 400,000 barrels per day (bpd), according to StoneX analyst Alex Hodes. “That potential increase looks very unlikely now,” he concluded.

Indeed, oil prices continued to rise by 1% on May 21 following news that Israel was allegedly preparing to strike Iranian nuclear facilities – an event that could harm oil supply across the Middle East and the globe.

Following the development, Brent futures rose again by 67 cents to $66.05 per barrel, with West Texas Intermediate climbing by 71 cents to $62.74.

According to a CNN report released on May 20, US intelligence and multiple US officials suggested that Israel was planning to attack nuclear facilities in Iran; however, it is not yet clear whether the Israeli government has made a final decision on the matter.

ING commodities strategists noted that the move would not only put Iranian supply at risk, but also “large parts of the broader region”.

With Iran exporting around 1.5mn bpd, fears of supply disruptions are not unfounded, and have consequently been the primary cause for higher prices – according to UBS analyst Giovanni Staunovo

If the attack was to occur, Iran could retaliate by blocking oil tanker flows through the Strait of Hormuz – a vital shipping route used by other Middle Eastern nations to export crude such as Kuwait, Saudi Arabia, UAE and Iraq, according to Reuters.

Rystad Energy analyst Priya Walia noted that OPEC+ could likely offset the costs of this, saying: “If tensions were to escalate, we're likely looking at temporary trade shifts or a supply hit of around 500,000 bpd – something OPEC+ could offset fairly quickly”.

So far, despite ongoing discussions, US President Donald Trump has continued to push for more sanctions on Iran, whereas Iran’s supreme Ayatollah Ali Khamenei remarked that both sides remained far from a resolution.