Iran blames US policy for deadlock as oil tops $100 a barrel

Iran's top diplomat blamed Washington's policies for the collapse of ceasefire talks, as Brent crude surged past $100 a barrel and bond yields climbed on renewed Middle East hostilities.

"There is no shortage of mediators between the US and Iran — the problem lies with the policies and actions of the United States itself," Foreign Minister Abbas Araghchi said in an interview Thursday, according to state media.

The comments came as Brent crude topped $100 a barrel for the first time since May, while the 10-year US Treasury yield breached 4.7 percent, its highest level this year. The average 30-year fixed mortgage rate rose to 6.58 percent, the highest since August, Freddie Mac data show.

The diplomatic impasse threatens to prolong a conflict that has already cost the US $37.5 billion, according to Defense Secretary Pete Hegseth, and killed at least 18 American service members. With the Strait of Hormuz — which carried one-fifth of global oil shipments before the war — effectively closed and Iran-backed Houthis now targeting Saudi tankers in the Red Sea, the risk premium embedded in energy prices shows no sign of dissipating.

Oil at $100 and the inflation feedback loop

The resumption of US-Iran hostilities after a brief ceasefire collapsed in June has reignited inflation concerns across bond markets. The June consumer price index report had shown tame inflation, partly because the earlier truce had cooled oil prices. But the renewed conflict is driving a reassessment. "Barring a near-term pullback in hostilities from both the US and Iran, oil prices may stay higher for longer, renewing inflation concerns and sustaining the pressure on bond yields," wrote John Canavan, lead analyst at Oxford Economics.

The bond market is "once again beholden to geopolitical headlines and the real-time fluctuations in oil," said Vail Hartman, a US rates strategist at BMO Capital Markets. Markets are "clearly viewing the June CPI report as a one-off that is unlikely to be repeated," Hartman added.

The Federal Reserve's July 28-29 meeting now carries heightened significance. While most analysts expect the central bank to hold short-term rates unchanged, an inflation rebound makes rate hikes more likely. "An elevated pace of core inflation during July and August would provide sufficient justification for a rate hike on Sept. 16," Hartman said.

Escalation across two strategic waterways

The conflict has spread beyond the Strait of Hormuz. Iran-backed Houthi forces in Yemen struck two Saudi oil tankers in the Red Sea this week, announcing a naval blockade of Saudi ships through the Bab al Mandeb strait — the only southbound route for Saudi crude headed to Asian markets. Saudi Arabia had diverted about 4.5 million barrels per day of exports to its Red Sea ports after Iran choked the Persian Gulf route.

The Houthis' military spokesman, Yahya al-Sarea, said the group forced 10 other ships to turn back and would "continue imposing the equation of blockade against blockade." President Donald Trump responded by threatening to hold Iran responsible and inflict "major military punishment" on the Houthis and Tehran.

The last time the US faced a comparable disruption across two major oil chokepoints was during the 2019 Abqaiq-Khurais attacks, which knocked out 5.7 million barrels per day of Saudi production and sent crude prices spiking 15 percent in a single session. The current situation is more protracted, with no ceasefire framework in place after the June agreement collapsed.

Global travel warnings and diplomatic fallout

The State Department issued a worldwide caution for Americans abroad, citing "the potential for unforeseen escalation" and noting that groups supportive of Iran may target US interests globally. Saudi Arabia remains under a Level 3 travel advisory — one step below "do not travel" — after the Houthis fired a ballistic missile at the kingdom's airport.

Iran has also suspended its commitments to a recent memorandum of understanding with the US, Deputy Foreign Minister Kazem Gharibabadi said Saturday, accusing Washington of violating the agreement. The diplomatic breakdown comes as Secretary of State Marco Rubio met with Lebanese President Joseph Aoun, who is scheduled to visit the White House on July 21 to discuss a framework agreement between Israel and Lebanon.

This article is for informational purposes only and does not constitute investment advice.