Oil markets moved higher on Monday amid continued uncertainty about access through the Strait of Hormuz and a fresh round of attacks in the region that market participants fear could disrupt supplies further.
As of 20:37 ET (00:37 GMT), Brent futures were trading at $84.45 a barrel, up 1.1%, while West Texas Intermediate futures stood at $78.18 a barrel, up 1.2%. Brent has gained more than 5% across the previous three trading sessions.
Hormuz reopening talks show progress but no immediate relief
Markets continued to monitor diplomatic efforts aimed at restoring navigation through the Strait of Hormuz after Iranian Foreign Minister Abbas Araghchi said over the weekend that an agreement with Oman to establish a shipping route through the waterway was "very close."
Araghchi, however, warned that any deal would not instantly reopen the strait, damping expectations for a rapid resumption of normal traffic and energy flows. Iran has also said it will not engage in direct talks with the U.S. for the time being, citing alleged violations of the interim peace agreement reached in June.
Tehran reiterated conditions it says must be met before Hormuz is fully reopened: an end to the U.S. naval blockade, removal of sanctions and payment of compensation for war damage. Meanwhile, Washington has said it is involved in discussions on management of the waterway, a claim Tehran disputes.
The combination of unresolved terms and disputes over the management of the strait has kept shipping through the chokepoint constrained. An Abu Dhabi National Oil Co. tanker was also targeted in the strait over the weekend, underlining the fragility of movements through the corridor.
Houthi attacks raise risk to alternate routes
Beyond Hormuz, supply worries were amplified by claims from Iran-backed Houthi militants that they attacked Saudi Arabia's Jazan refinery near the Red Sea. Saudi authorities said a fire at the Aramco-operated Jazan refinery was extinguished after the attack.
The latest incidents have fueled concern that the conflict could broaden, threatening alternate export pathways for Middle East crude. Houthi forces also claimed responsibility for a large-scale attack against Yemen's Saudi-aligned government, and there were reports they struck a Saudi tanker in the Gulf of Aden and issued threats to shipping in the northern Red Sea.
Market reaction and analyst commentary
Analysts at ANZ noted a volatile price pattern in recent sessions. Oil initially dropped sharply after the U.S. announced a pause in attacks on Iran to allow talks over reopening Hormuz, only to rebound when it became clear any reopening could still place substantial restrictions on vessels using the waterway.
Prices were also pushed higher on Friday after Iran's semi-official Fars news agency reported attacks on hostile targets in the strait following explosions near Qeshm Island. In addition, Abu Dhabi National Oil Co. said three of its tankers had been attacked while transiting Hormuz last week.
Other supply dynamics - Black Sea and Caspian route
Some supply-side strain eased slightly after Ukraine agreed not to target certain non-Russian oil tankers and Black Sea energy infrastructure that is critical to Kazakhstan's crude exports. Nonetheless, the Caspian Pipeline Consortium terminal has suffered repeated attacks in recent weeks, placing at risk roughly 1.8 million barrels per day of Kazakhstan's export capacity.
Traders and market watchers said the interplay of threats to Hormuz, the Red Sea and Black Sea routes has kept the oil complex on edge, as options for rerouting cargoes remain limited and exposed to further escalation.
Implications for markets
The combination of diplomatic uncertainty over Hormuz, continued militant attacks on shipping and refinery infrastructure, and security incidents affecting pipeline and terminal routes has supported oil prices this week. Market participants are attentive to any material change in the security environment or diplomatic progress that could alter flows through the region's key export corridors.