OPINION: The weekend attack on the Natanz nuclear facility in Iran underlines the difficulties of securing a stable new nuclear deal between Tehran and the US.
Tehran has blamed Israel for the strike and has promised to retaliate despite the dangers of doing so.
Iran has also said it will begin enriching uranium to a purity of 60%. That would bring it closer to the levels needed for a nuclear bomb.
Renewed Middle East tension pushed oil prices upwards, but also raised the temperature of indirect talks between Washington and Tehran in Vienna.
Brent blend crude was valued above $64 per barrel on Wednesday, up on last week, but down from $70 in early March.
The early peace discussions in Austria involving a range of outside countries were seen as positive for geopolitics, though negative for oil values.
A revised and workable nuclear agreement between the US and Iran would open the door to more Iranian oil exports.
However, we are a long way from that point and many obstacles remain.
Oil analysts at Goldman Sachs said they would stick to their forecast of $75 per-barrel average Brent for the end of 2021 and 2022.
But they also said a quick agreement this year between the US and Iran could knock $5 off their forecast. No agreement over the next 12 months, however, could add more than $10 in upside risk.
The lack of a deal would also help the US oil industry, particularly shale producers hammered by the 2020 collapse in prices.
It is doubtful that this will hugely influence White House negotiators who are domestically pushing renewable power over fossil fuels.
US President Joe Biden's pursuit of these discussions indicates he wants a new era of co-operation.
His counterpart, Iran's President Hassan Rouhani, is stepping down at the June elections and would love to leave with a constructive deal in place.
Sanctions are causing enormous hardship for Iran's economy and many locals crave a more normal relationship with the West.
But Rouhani also is aware that the conservative political class in Iran will accept nothing that looks like caving in to US pressure.
He spent the country’s National Nuclear Technology Day overseeing the launch of advanced centrifuges to enrich uranium, a key component for nuclear weapons.
But he also stressed that “all our nuclear activities are peaceful and for non-military purposes.”
Iran has also reiterated that all US sanctions must be lifted before it will again comply with the 2015 nuclear deal it signed with then-president Barack Obama.
That deal, which was also signed by European countries now helping to oversee the new negotiations, fell apart after Donald Trump reintroduced sanctions and added more.
While the Biden administration has signalled it is prepared to row back on Trump’s policies, it also faces pressure at home not to give too much away.
Many want Iran to curb its support for militant groups deemed to be acting as proxies in Syria and Iraq.
Meanwhile, key US allies, including Israel, are alarmed at the prospects of Washington cosying up to what they deem a dangerous enemy, Tehran.
Israel has not admitted an attack on Natanz, but has made no effort to deny it either. The peace talks have created hopes and fears for geopolitics — and oil.
(This is an Upstream opinion article.)