Oil prices surge 4% as Iran-US standoff over Hormuz deepens
Oil jumps over 4% as Iran and US trade demands, dimming hopes for a quick deal to reopen the Strait of Hormuz.
Oil prices climbed more than 4% on Monday as fresh demands from both Tehran and Washington dampened expectations of an imminent agreement to reopen the Strait of Hormuz, a vital artery for global crude shipments.
Brent crude futures rose $3.57, or 4.3%, to $87.13 a barrel, while US West Texas Intermediate crude gained $3.36, or 4.3%, to $81.51. Both benchmarks had fallen over 7% last week on tentative hopes that Iran and Oman were close to finalising a deal on new shipping lanes through the strait.
Iran said it was nearing a final pact with Oman to define new routes, but reiterated that Washington must lift sanctions, end military threats, and pay compensation before the waterway could be reopened. US President Donald Trump, meanwhile, said Iran must pay for "all of the people that they have killed and gravely wounded."
There are currently no direct talks between Iran and the US. Iranian Foreign Minister Abbas Araqchi said on Sunday that Tehran would not engage while Washington remains in breach of an interim agreement signed in June.
Traders noted that the added Iranian demands suggest tighter supplies could persist for longer. "With Iran making the added demands, most traders feel near term, tighter supplies are more probable for longer," said Dennis Kissler, senior vice president of trading at BOK Financial.
Supply concerns were compounded by an attack by Iran-aligned Houthis on Saudi Aramco's Jazan refinery on Sunday. The company has postponed the restart of the 400,000-barrel-per-day facility to August 30 after two recent strikes. The attack came two days after Saudi Arabia signed a defence pact with Turkey and Pakistan.
ADNOC, the UAE's state-owned oil company, reported that 15 of its vessels had been attacked while transiting the Strait of Hormuz since the conflict began. Ukrainian strikes also continued to target Russian energy infrastructure, hitting the Taneco refinery in Tatarstan and the ZapSibNeftekhim petrochemical plant.
In the US, crude stocks in the Strategic Petroleum Reserve fell by about 6.1 million barrels to 298.7 million barrels last week, the lowest level since January 1983.