U.S. Retaliatory Strike on Iran Raises Alarm Over Global Oil Inventories

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Summary:

Fighting has resumed as the U.S. launched retaliatory strikes against Iran; the EIA warned that global oil inventories are rapidly approaching their lowest levels in more than two decades.

Headlines

1. Fighting resumes as the U.S. launches retaliatory strikes against Iran

2. U.S.-Iran nuclear talks move closer to a framework agreement

3. Iran denies submitting any new proposal to the United States

4. EIA: Global oil inventories are rapidly approaching a more than 20-year low

5. Bank of Japan considers pausing bond purchase reductions next fiscal year and may raise rates in June

6. Rising oil prices push Canadian exports to a record high, with the trade surplus reaching its largest level since before Trump's tariffs

Details

Fighting Resumes as the U.S. Launches Retaliatory Strikes Against Iran

At 5:00 p.m. Eastern Time on June 9, the U.S. military carried out what it described as a defensive strike against Iran in response to the downing of a U.S. Apache helicopter the previous day.

Explosions were reported in several areas of Iran's Hormozgan Province, and air defense systems were activated in some locations. Iranian authorities have yet to issue an official response.

Meanwhile, U.S. officials indicated that the operation was intended as a warning to Iran and would not interfere with the ongoing U.S.-Iran negotiations.

U.S.-Iran Nuclear Talks Near Framework Agreement

According to The New York Times, citing U.S. officials and diplomats familiar with the negotiations, differences between Washington and Tehran have narrowed on four key issues:

Suspending uranium enrichment activities for 15 years;Diluting Iran's existing stockpile of enriched uranium;Dismantling most nuclear facilities;Expanding the scope of international inspections.

However, renewed military tensions, including the downing of the U.S. helicopter, continue to cloud the outlook for the talks.

Negotiators are also discussing the potential release of roughly $25 billion in frozen Iranian assets.

U.S. officials remain cautiously optimistic that detailed negotiations can resume soon, although political and military opposition on both sides still poses significant risks.

Iran Has Not Submitted Any New Proposal to the United States

Sources familiar with the Iranian negotiating team told Fars News Agency that Tehran has not submitted any new proposal to Washington.

Earlier in the day, Sky News reported that Iran had presented a revised peace proposal that the United States was reportedly willing to consider. However, Iranian officials denied the report.

Previous reports by Al Arabiya claiming that Iran had agreed to transfer its enriched uranium to a third country were also rejected by Tehran.

EIA: Global Oil Inventories Sliding Toward Their Lowest Levels in More Than Two Decades

The U.S. Energy Information Administration (EIA) said that the conflict involving Iran has severely disrupted Middle Eastern oil production capacity. Major economies are drawing down crude inventories at a record pace, causing global oil stockpiles to continue declining toward their lowest levels since at least 2003.

In its Short-Term Energy Outlook released on Tuesday, the EIA stated that, under its baseline scenario, international shipping volumes through the Strait of Hormuz are unlikely to return to pre-conflict levels before early 2027.

By December this year, total OECD oil inventories are projected to fall below 2.3 billion barrels.

The EIA emphasized that since it began maintaining its global energy inventory database in 2003, OECD crude inventories have never fallen to such low levels.

According to the agency, geopolitical conflict in the Middle East has effectively removed as much as 11 million barrels per day of oil supply. To offset the shortfall, countries have been forced to aggressively draw down inventories, creating conditions that could trigger another surge in international oil prices in the coming months.

EIA forecasts:

2026 WTI crude oil price: $88.32 per barrel (previous forecast: $85.68)

2027 WTI crude oil price: $74.39 per barrel (unchanged)

2026 Brent crude oil price: $95.39 per barrel (previous forecast: $94.85)

2027 Brent crude oil price: $79.39 per barrel (unchanged)

Bank of Japan Considers Pausing Bond Purchase Reductions and Raising Rates in June

According to sources familiar with the matter, the Bank of Japan is considering maintaining its current level of government bond purchases from the next fiscal year onward.

However, opinions within the Policy Board remain divided. Some members favor prioritizing market stability, while others believe the BOJ should continue gradually reducing bond purchases to shrink its massive balance sheet.

At its June meeting, the central bank will review the current bond tapering plan, which runs through March next year, and formulate a new strategy for fiscal 2027 and beyond.

Four sources familiar with the BOJ's thinking said the bank is increasingly inclined to pause further reductions in bond purchases, given the progress already made in balance-sheet normalization.

One source noted that the BOJ could afford to pause because maturing bonds alone would significantly reduce its holdings.

The sources also said the central bank may abandon its practice of setting annual tapering plans and instead adopt an open-ended framework, pledging to continue purchasing ¥2.1 trillion of bonds each month.

In addition to decisions regarding quantitative tightening, Nikkei reported that the BOJ is considering raising its policy rate from 0.75% to 1.0% at the June meeting to address rising inflation risks.

Oil Prices Drive Canadian Exports to Record Highs

Canada's trade surplus widened further in April as higher oil prices pushed exports to a record level.

Statistics Canada reported on Tuesday that the country's trade surplus increased from C$1.75 billion in March to C$2.72 billion in April.

This marked Canada's second consecutive monthly trade surplus and the largest surplus since January 2025.

Canada's trade surplus with the United States also reached its highest level since February 2025, before President Trump imposed tariffs on Canadian goods.

Total exports rose 1.6% to C$75.2 billion in April, with gains spread across multiple sectors.

Energy exports made the largest contribution, with crude oil exports increasing 7% due to higher prices.

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