Oil prices climb over 2% as US-Iran peace hopes dim

Oil prices surged more than two percent on Tuesday, reversing earlier gains, as investor optimism over a swift US-Iran diplomatic breakthrough faded. The shift came after US President Donald Trump hardened his public stance toward Tehran, demanding reparations and asserting full American naval dominance over the Strait of Hormuz.

Brent crude futures were trading at $89.81 per barrel, up 2.1 percent, while US West Texas Intermediate crude rose 2.3 percent to $84.39 per barrel at the time of reporting.

Speaking to reporters at the Oval Office, Trump declared that the United States Navy currently holds complete control over the strategic waterway. "The only one that has control of the Strait of Hormuz right now is the United States Navy," he said, adding that Washington maintains a blockade and decides which vessels may pass through.

Trump also revealed that he has instructed American negotiators to seek financial compensation from Iran in any future talks. He argued that Tehran should pay for damages it has caused over the past five decades, a stance that reverses his earlier rejection of Iran's own reparations demands.

On his Truth Social platform, Trump wrote that Iranian representatives had been seeking compensation for damage from the "last five months Military Conflict," which he claimed began after Iran refused to abandon its nuclear ambitions. He also referenced victims of the 2000 USS Cole bombing in his justification for demanding reparations.

These remarks come after Tehran had linked its war reparation claims to the reopening of the Strait of Hormuz, alongside the lifting of US sanctions and the end of naval blockades. The hardening rhetoric on both sides has injected fresh uncertainty into the market, with traders now reassessing the likelihood of a negotiated settlement and the potential for disruptions to global energy flows.