Oil prices rose Wednesday after Prime Minister Benjamin Netanyahu told CNBC that Israel and the U.S. are prepared to strike Iran again if necessary.
West Texas Intermediate futures gained nearly 2% to $95.43. International benchmark Brent crude advanced more than 1% to $97.54 per barrel.Â
President Donald Trump has warned Iran "there will be a full scale return to military action" if necessary, Netanyahu told CNBC's Sara Eisen in an exclusive interview.
"It's the president's decision," Netanyahu said. "Israel is ready and the U.S. forces are ready. I think Iran should take that into account. I think they are taking into account, but they're playing with fire."
When asked about Israel's military offensive in Lebanon, the prime minsiter said "we have to disarm Hezbollah and we have to demilitarize Lebanon." Trump also shares this goal, the prime minister said.
Netanyahu downplayed speculation his relationship with Trump is strained due to his actions in Lebanon. The prime minister said the U.S. and Israel have had tactical disagreements but they largely agree.
Iran has refused to agree to a deal with the U.S. to reopen the Strait of Hormuz, which is crucial for global oil supplies, until Israel halts its attacks in Lebanon and withdraws from the country.
Meanwhile, the U.S. and Iran traded military strikes again, demonstrating the fragility of the ceasefire between the two countries. U.S. Central Command said Tuesday that it had defeated multiple Iranian ballistic missiles and drones and launched defensive strikes following "attempted attacks" by Iran.
That followed Trump and Secretary of State Marco Rubio saying that Washington was still engaged in talks with Iran over a potential deal to halt the conflict, pushing back against Iranian media reports suggesting communications had broken down.
Rubio also told the Senate Foreign Relations Committee that as part of those discussions, "there is the prospect" that Iran "could negotiate aspects of their nuclear program."
That was contrary to a report by Iran's Fars news agency on Tuesday that said Tehran and Washington had not exchanged messages for several days. State-linked outlet Tasnim had reported Monday that Iranian negotiators would cease indirect communications with the U.S. and that Tehran would seek to fully shut Hormuz.
"Fake News Reports that the Islamic Republic of Iran, and the U.S.A., stopped speaking a few days ago are false and erroneous," Trump said in a Truth Social post on Tuesday afternoon.
Oil exports through Hormuz remain way below prewar levels as Iran has basically taken control of the sea lane. Global inventories are rapidly falling due to the blockade of Hormuz just as fuel demand is expected to pick up this summer. Oil prices will spike as a result, industry executives and analysts say.
The oil market will lose another 1 billion barrels of crude production and 800 million barrels from inventories between June and November even in the most optimistic scenario where Hormuz fully reopens, according to TD Securities.
"The damage is done, and oil markets will continue to tighten even under a comprehensive deal scenario," Ryan McKay, senior commodity strategist at TD Securities, told clients in a Monday note.