Oil climbs $2 as Iran standoff deepens, Hormuz shipping stalls
Oil jumped over $2 on Monday as US-Iran talks stalled, Hormuz transits slowed, and ADNOC sold spot crude to Asia.
Oil prices climbed more than $2 on Monday, with Brent crude futures settling near $91 a barrel, as investors grew increasingly pessimistic about diplomatic efforts to end the conflict between the US and Iran. The market is now weighing the risk of deeper supply disruptions against the possibility of a sudden resolution that could reopen the Strait of Hormuz and send prices sharply lower.
US President Donald Trump, in a phone interview, demanded Iran's surrender and warned that the US would bomb Oman if it interfered with military operations. A senior Iranian official said Tehran would escalate tensions in the Strait of Hormuz and beyond, and launch an attack if the US fails to fully implement an interim peace deal within weeks. Monday was the deadline for a final deal under a June memorandum of understanding.
Shipping through the Strait of Hormuz has slowed dramatically. Ship-tracking data from Kpler showed only five commodity vessels transited the strait on Saturday, with none registered for Sunday, compared with 31 over the prior weekend. Before the conflict began in late February, the strait handled roughly one-fifth of global oil and liquefied natural gas supplies.
In response to the disruption, ADNOC sold at least 14 million barrels of spot crude to Asian refiners at premiums in its latest tender, according to trade sources. Saudi Aramco is also offering crude outside the strait to some Asian buyers.
US Energy Secretary Chris Wright said he would speak with refiners about boosting fuel production to lower gasoline prices, which remain high. He added that Iran cannot export oil under current sanctions, but argued the world does not need Iranian supply. US crude stocks in the Strategic Petroleum Reserve fell to their lowest level since December 1982, as part of a planned release of 172 million barrels.
Analysts said prices are likely to consolidate around current levels unless there is a full halt in Hormuz traffic or a closure of the Bab el-Mandeb strait. "As the rhetoric heats up, so do the prices," said Phil Flynn of Price Futures Group, noting that uncertainty about ship crossings is building concern in the market.