Oil prices climbed on Tuesday as diplomatic momentum toward ending the Middle East conflict weakened, with Tehran announcing it will adopt a more offensive military posture and the United States saying it would not lengthen a temporary ceasefire arrangement. The shift heightened market concerns about potential disruptions to energy flows.
A senior Iranian official told reporters that Iran will move to a "fully offensive" stance because talks to reach a permanent end to hostilities with the U.S. have stalled. U.S. authorities, for their part, ruled out extending a ceasefire agreement that had been in place temporarily.
Observers noted that outward progress toward peace negotiations and a resumption of oil tanker traffic through the strategic Strait of Hormuz has effectively come to a halt, a development that risks prolonging the conflict that, the article reports, was launched with attacks on Iran on February 28 attributed to the U.S. and Israel.
Market pricing reflected the heightened supply worries. Brent crude futures rose by 27 cents, or 0.3%, to $91.14 a barrel by 0003 GMT after earlier touching their highest level since July 30 on Monday. U.S. West Texas Intermediate contracts traded at $85.04 a barrel, up 42 cents, following an intraday gain that pushed the benchmark to $85.37 earlier, its strongest since July 31.
"Oil has jumped to start the week as U.S.-Iran relations look increasingly shaky. A deal to reopen the Strait of Hormuz still does not appear to be in sight, and shipping numbers remain at a trickle," said Tim Waterer, chief market analyst at KCM.
Ship-tracking records cited in the report showed that, after attacks on tankers, only five commodity vessels transited the Hormuz strait on Saturday and none were registered for Sunday, compared with 31 vessels during the prior weekend, underscoring the marked drop in traffic.
Separately, Yemen’s Houthi movement said it struck what it described as a Saudi military ship and four escort vessels in the Red Sea, a claim attributed to the group’s military spokesperson, Yahya Saree, on Telegram.
"The dual chokehold on the Strait of Hormuz and the Bab el-Mandeb remains highly significant. These are not secondary concerns. They sit at the centre of the current supply-risk narrative," Waterer added.
The report also noted that Iran has been in separate talks with Oman about managing the strait and said they were close to a deal. According to the article, a U.S. response to those negotiations included a threat from Trump to bomb the Gulf state, described as a longstanding U.S. security partner. Media reports also indicated Trump had opened back-channel discussions with the Islamic Revolutionary Guard Corps.
On the inventory front, a preliminary poll indicated U.S. crude stockpiles were expected to have declined last week, with product inventories also forecast to have fallen, the piece noted, citing a Reuters poll and marking the line with [EIA/S].
Key takeaways
- Geopolitical tensions between Iran and the U.S. have intensified, with Iran announcing a move to a "fully offensive" posture and the U.S. refusing to extend a temporary ceasefire.
- Shipping through the Strait of Hormuz remains sharply reduced, amplifying oil supply risk and supporting upward pressure on crude prices.
- U.S. crude inventories were expected to have fallen in the latest week, according to a preliminary poll, supporting tighter market balances.
Impacted sectors: Oil producers and exporters, shipping and maritime insurers, refiners and downstream fuel markets.
Risks and uncertainties
- Continuation or escalation of military actions that could further disrupt tanker routes through the Strait of Hormuz and Bab el-Mandeb - primarily affecting global oil supply and shipping.
- Uncertainty around diplomatic outcomes, including stalled negotiations and competing bilateral actions, that could keep market sentiment volatile - affecting crude price stability and energy-sector investment planning.
- Potential for additional attacks on vessels or convoy escorts in key choke points, as indicated by reported strikes in the Red Sea, which could increase insurance costs and rerouting that raise transportation costs for crude and refined products.