Oil rates surged sharply on Wednesday, with prices climbing roughly 3%, after Vice President JD Vance said Iran had failed to address key US demands in nuclear negotiations this week — and made it clear that military strikes remain an option if diplomacy collapses.
By mid-morning trading, US crude was up about $1.99, or 3.19%, at $64.32 a barrel, while Brent crude rose $2.04, or 3.03%, to $69.46 per barrel. Traders reacted strongly to mounting geopolitical risk tied to the stalemate and the possibility of a conflict in the Middle East.
Vance, speaking on Fox News on Tuesday evening, said Tehran had not met US “red lines” set during the latest round of nuclear talks in Geneva, and reiterated that President Donald Trump reserves the right to use force if negotiations do not succeed.
“In some ways it went well — they agreed to meet afterwards,” Vance said. “But in other ways it is very clear the president has set red lines that the Iranians are not yet willing to acknowledge and work through.”
Despite Iranian officials describing the Geneva talks as “constructive” and saying they produced general principles for future negotiations, markets were unsettled by Vance's remarks that key issues remain unresolved.
US envoys Steve Witkoff and Jared Kushner met Iranian officials in Geneva on Tuesday for nuclear negotiations. Iran's Foreign Minister Abbas Araghchi described the talks as “constructive”, telling state media that both sides reached a broad understanding on guiding principles for potential next steps.
Sources speaking to Axios also warned that any US military campaign against Iran could resemble a full-blown war rather than limited strikes, adding to risk sentiment in energy markets.
Geopolitical tensions have also been heightened by recent Iranian military exercises in the Strait of Hormuz, a strategic chokepoint through which roughly one-third of global seaborne crude exports flow. Iranian state media reported portions of the strait were temporarily closed due to the exercises.
Traders fear that, in the event of an escalation, oil shipments could be disrupted — a scenario that typically boosts crude prices.
US military forces in the region have been reinforced, with the USS Abraham Lincoln aircraft carrier already deployed and the USS Gerald R. Ford en route, after Trump said the second carrier was sent in case diplomacy fails.
The Iranian government had not immediately responded to requests for comment.
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