Crude oil prices rose on Monday as fading hopes of a breakthrough in US-Iran talks and slower tanker traffic through the Strait of Hormuz kept geopolitical concerns in focus.
Brent crude futures rose as much as 1 per cent to USD 89.40 a barrel and were last up 72 cents at USD 89.20 by 0229 GMT. US West Texas Intermediate crude futures gained 44 cents to USD 82.83 a barrel.
Both benchmarks had gained more than 5 per cent last week after attacks on tankers operated by Abu Dhabi National Oil Company in the Strait of Hormuz and a Saudi Aramco refinery.
Hormuz tensions keep crude prices elevated
The Strait of Hormuz remains the key factor driving oil prices as markets assess the risk of disruption to crude supplies from the Gulf region.
US President Donald Trump’s latest remarks on the strategic waterway have added to tensions with Iran. Trump has said that the Strait of Hormuz could become US territory after the conflict with Iran ends.
International market expert Ajay Bagga said the market was closely watching the situation but had so far avoided pricing in a major supply disruption.
“Trump has said that the Strait of Hormuz will become American territory. Iran, in response, has said that you cannot win a war through tweets,” Bagga said.
He said incidents involving ships, including missile and drone attacks, were continuing, but there had been no major escalation that would significantly affect oil supplies.
Oil supply still adequate
Despite the geopolitical tensions, Bagga said global oil markets were not facing an immediate shortage.
He said around 9 million barrels per day were still moving out of the Gulf, while another 5-6 million barrels per day were being transported through pipelines.
“The oil market is adequately supplied. We are not seeing an undersupply,” Bagga said.
The comments suggest that the recent rise in crude prices is being driven largely by geopolitical risk rather than an actual shortage of physical oil.
For oil prices to move significantly higher from current levels, the market would need to see a fresh disruption to production, exports or shipping routes, he said.
Iran says Oman talks are not about reopening Hormuz
Iranian Foreign Minister Abbas Araghchi has said that ongoing negotiations between Iran and Oman are separate from the reopening of the Strait of Hormuz.
According to Al Jazeera, Araghchi said the discussions with Oman were focused on establishing new maritime navigation routes because the previous routes were no longer operational.
He said Iran and Oman were working on a temporary navigation route that could later become permanent. However, he stressed that reaching an agreement on the route would not automatically mean that the Strait of Hormuz would reopen.
According to Araghchi, any decision on reopening the waterway would depend on the United States fulfilling certain conditions.
The distinction is important for oil markets because a technical agreement on navigation routes may not immediately restore normal tanker traffic through the strategic waterway.
Any de-escalation could trigger sharp fall in crude
Bagga said the outlook for crude prices was largely dependent on the next development in the US-Iran conflict. “Oil prices should not rise further from here unless there is an escalation. The outcome is binary,” he said.
He added that an agreement between Oman and Iran could become a bearish trigger for crude prices. “If an agreement between Oman and Iran is announced, it could be quite bearish for the oil market, and prices could fall sharply,” Bagga said.
This means crude prices could remain volatile in the near term. A fresh attack or disruption to tanker movement could push prices higher, while progress on negotiations could remove part of the geopolitical premium currently built into oil prices.
What crude markets are watching
Oil traders are likely to track tanker movement through the Strait of Hormuz, developments in US-Iran negotiations and any fresh attacks on energy infrastructure.
Iranian officials have rejected Trump’s claims over the waterway. Iranian Deputy Foreign Minister Kazem Gharibabadi said the Strait of Hormuz could not be seized through military force or political statements and reiterated Iran’s position over the strategic waterway.
Trump, meanwhile, has claimed that the United States has “total control” over the Strait and has referred to the US naval presence as a “wall of steel”.
For crude markets, the key issue remains whether the geopolitical tensions translate into an actual reduction in physical oil supply.
