Oil prices steady as US-Iran talks stall over compensation demand

Oil prices held steady on Tuesday at more than one-week highs as optimism over a potential US-Iran agreement faded. President Donald Trump's demand that Iran pay compensation for war-related damages has complicated efforts to reopen the Strait of Hormuz, a critical oil shipping route.

Brent crude futures were flat at $87.81 a barrel, while US West Texas Intermediate crude held at $82.20 a barrel. Both benchmarks had surged more than 5% on Monday, reaching their highest levels since July 31.

The market's earlier optimism was driven by hopes of a peace deal, but Trump's counter-demands have widened the gap between the two nations. "There appears to be a gulf, no pun intended, between the U.S. and Iran over what any agreement would actually look like," said Tim Waterer, chief market analyst at KCM Trade. "As a result, some of the optimism that built up last week is being unwound."

Trump later stated that the US Navy had control of the strait and had swept the waterway for Iranian mines. However, analysts warn that the risk around both the Strait of Hormuz and the Bab el-Mandeb remains significant. Even intermittent restrictions or the threat of further incidents keep insurance costs elevated and force longer shipping routes, keeping energy flows constrained in the near term.

In a separate development, Saudi Aramco postponed the restart of its 400,000-barrel-per-day Jazan refinery to August 30 after the Houthis claimed two attacks on the plant on Sunday. Barclays analysts noted that crude and refined product net exports through Hormuz averaged 3 million barrels per day in the week ending August 7, down from 4.4 million bpd the previous week.

Elsewhere, Iraq raised the September official selling price for Basra Medium crude to Asia by $2.50 to minus $4 a barrel against the average of Oman/Dubai quotes.