MARKET NEWS

(Bloomberg) -- Oil bounced between gains and losses in a volatile session, with a deadline looming for Iran to meet US President Donald Trump’s demand to reopen the Strait of Hormuz or face the destruction of key infrastructure.

Brent climbed above $110, while West Texas Intermediate nudged higher. As an 8 p.m. Eastern Time cut-off approaches, Trump stepped up his threats saying that probably “a whole civilization will die tonight.” Vice President JD Vance, meanwhile, said the US was confident it will get a response from Iran.

Markets began the European trading day with moves that suggested rising expectations of an easing of hostilities, with crude futures reversing earlier gains. Prices later spiked after Iran’s semi-official Mehr news agency said explosions were heard on Kharg Island, home to the country’s main oil export terminal. Subsequent reports said the US hit military targets on the island.

Trump said Monday the US military could destroy “every bridge in Iran by 12 o’clock tomorrow night.” Power plants would be rendered “burning, exploding and never to be used again,” he said. That would be a breach of the Geneva Conventions.

Iran has warned that it would respond to such strikes by ramping up its own attacks on energy infrastructure in the Persian Gulf — a move that could heighten the global fuel squeeze and amplify damage to the world economy. The war — which is now in its sixth week — has roiled crude markets, triggering a severe supply shock.

Oil markets have been hugely volatile since the war began, which is limiting how long traders can hold positions for and curbing position sizes as they run into risk limits. A gauge of Brent volatility had its highest monthly average in data since 2015 last month, and daily price swings have on average been more than $9 since the war began, the biggest in years.

“Either we get a fragile détente – no ground war, controlled escalation, gradual supply recovery– or a protracted conflict with boots on the ground and structurally higher risk premia as countries respond with extreme stockpiling,” Societe Generale SA analysts including Mike Haigh and Ben Hoff wrote in a note.

As the war grinds on, there are signs of deepening concern about near-term supply. WTI’s prompt spread — the difference between its two nearest contracts — at one point traded near $15.50 a barrel on Monday, near the biggest premium on record. The widening was ushered in by firming expectations of tighter US supplies as overseas buyers rush to purchase American crude.

--With assistance from Charles Gorrivan.