Trump’s threat of further penalties on Iran causes oil to rise 2%

U.S. President Donald Trump threatened additional sanctions on Iran after a fourth session of U.S.-Iran talks was postponed, which caused oil prices to settle about 2% higher on Thursday.

Brent oil futures ended the day up $1.07, or 1.8%, at $62.13 a barrel, while U.S. West Texas Intermediate oil futures ended the day up $1.03, or 1.8%, at $59.24 each.

Trump declared that all purchases of Iranian oil and petrochemical products must cease, and that any nation or individual who does so will face immediate secondary sanctions.

His remarks come after negotiations over Iran’s nuclear program were postponed. The meetings were originally scheduled to take place in Rome on Saturday. The U.S. approach will determine a new date, a senior Iranian official told Reuters.

“A reduction in supply of approximately a million and a half barrels per day could result from the Trump administration’s successful implementation of secondary sanctions on the purchase of Iranian oil,” stated Andrew Lipow, president of Lipow Oil Associates.

“These low prices of oil are giving the Trump administration cover to more strictly enforce those sanctions, especially at a time that OPEC+ is producing well over their quota and looking to increase production.”

For the second straight month, a number of OPEC+ countries are expected to propose that the cartel speed up output increases in June, according to three sources with knowledge of OPEC+ negotiations. To decide on an output plan for June, eight OPEC+ nations will convene on May 5.

Saudi Arabia is reportedly telling allies and industry insiders that it can tolerate a protracted period of low oil prices and is not inclined to support the market with production cuts, according to individuals who spoke to Reuters.

But in terms of demand, the U.S. economy shrank for the first time in three years in the first quarter, according to data released on Wednesday. This was due to a surge in imports as companies scrambled to avoid higher tariff costs, highlighting the disruptive effects of Trump’s erratic trade policies.

The world economy is likely to enter a recession this year as a result of Trump’s tariffs, according to a Reuters poll.