Oil jumps after Vance says Iran ignored red line, strikes on the table

U.S. crude oil rose $1.99, or 3.19%, to $64.32 per barrel by 10:09 a.m. ET. Global benchmark Brent was up $2.04, or 3.03%, to $69.46 per barrel.

U.S. envoys Steve Witkoff and Jared Kushner held nuclear talks with Iran in Geneva on Tuesday. Iran’s foreign minister, Abbas Araghchi, described the discussions as “constructive,” according to Iranian media. Araghchi said the talks yielded a general agreement on guiding principles.

Oil prices closed lower Tuesday as traders interpreted the foreign minister’s comments as a sign that the U.S. and Iran could still reach a settlement.

But Vance said Tehran had failed to address core U.S. demands.

“In some ways it went well, they agreed to meet afterwards,” the vice president told Fox News on Tuesday evening. “But in other ways it is very clear that the president has set some red lines that the Iranians are not yet willing to actually acknowledge and work through.”

Trump reserves the right to use force if diplomacy does not succeed in stopping Iran’s nuclear program, Vance said. “We do have a very powerful military — the president has shown a willingness to use it,” the vice president told Fox News.

Sources told Axios, meanwhile, that a U.S. military campaign against Iran would likely be massive, last weeks and look more like a full-fledged war than the raid that captured Venezuelan President Nicolás Maduro in January.

Iran’s Revolutionary Guard conducted war games this week in the Strait of Hormuz, a vital trade choke point for global oil flows. About one-third of all waterborne crude exports pass through the narrow waterway, according to data from energy consulting firm Kpler.

The market is worried those oil flows would be disrupted if the U.S. and Iran go to war. Iranian state media said traffic in part of the strait was closed Tuesday due to the military exercises.

Kpler did not observe any halt in traffic in the strait on Tuesday, said Matt Smith, an oil analyst at the firm.

Trump has stationed the USS Abraham Lincoln aircraft carrier in the Middle East. The USS Gerald Ford is en route to the region.

Trump said Friday he deployed the second aircraft carrier in case negotiations fail. “If we don’t have a deal, we’ll need it,” the president told reporters outside the White House.

The Iranian government did not immediately respond to CNBC’s request for comment.