Oil jumps 3% as Iran delays Strait of Hormuz reopening

Oil prices climbed nearly 3% on Monday after Iran reiterated that the United States must meet several conditions before the Strait of Hormuz can reopen, reviving concerns over global energy supplies and pushing crude benchmarks higher.

Brent crude futures rose 3.27%, to $86.30 a barrel, while US West Texas Intermediate crude futures gained 3.48%, to $80.84.

The gains followed a sharp decline last week, when both benchmarks fell more than 7% on optimism that Iran and Oman were nearing an agreement to reopen the Strait of Hormuz.

The strategic waterway previously handled about one-fifth of global oil and liquefied natural gas shipments before the conflict in the Middle East began at the end of February.

However, Iran said it was close to reaching a final agreement with Oman on new shipping lanes through the strait while maintaining that Washington must first meet several conditions, including compensation, the removal of sanctions and an end to military threats before the waterway can reopen.

Iranian Foreign Minister Abbas Araqchi also said Tehran would not resume talks with the United States while Washington continued to violate an interim agreement signed in June.

Supply concerns deepen amid regional security risks

The latest geopolitical developments added to concerns over disruptions to global energy supplies.

Iran-aligned Houthi forces said they had launched an attack on Saudi Aramco’s Jazan refinery on Sunday, just two days after Saudi Arabia signed a defence agreement with Turkey and Pakistan in response to growing regional instability linked to the US-Israel conflict with Iran.

Separately, UAE oil producer ADNOC said on Friday that 15 of its vessels had been attacked while transiting the Strait of Hormuz since the conflict began.

Shipping activity through the waterway has fallen sharply. According to ship-tracking platform MarineTraffic, only eight to 15 vessels crossed the strait on August 4, 5 and 6, compared with roughly 130 daily transits before the conflict.

Following Monday’s advance, Brent crude remained about 16% above levels seen before the outbreak of the US and Israel’s war with Iran.

“The lack of concrete movement, together with lingering questions about the practical details of any agreement, is keeping a risk premium in the price,” Tim Waterer, chief market analyst at Sydney, Australia-based KCM Trade, told Al Jazeera.

“Each day that passes without a breakthrough is making traders a little more cautious.”

Analysts see geopolitical risks supporting crude

Market analysts said uncertainty surrounding the Strait of Hormuz continues to underpin oil prices despite reports that Iran and Oman are nearing a shipping agreement.

According to TD Securities, trend-following investors have shifted back into crude oil.

“CTAs (Commodity Trading Advisor) have turned buyers of crude oil and heating oil as a Hormuz deal remains elusive.”

The bank added that “CTAs are starting the week as buyers across WTI and Brent crude oil, along with heating oil,” citing continued geopolitical risks, Houthi attacks on Saudi energy infrastructure, restricted shipping through Hormuz and Bab el-Mandeb, and reduced Russian exports and refining activity.

ING also pointed to ongoing uncertainty surrounding negotiations.

“Oil prices remain supported by uncertainty surrounding the Strait of Hormuz.”

The bank added that while reports suggest Iran and Oman are nearing an agreement on shipping routes, “significant hurdles remain before any broader agreement is reached,” noting that a full reopening of the waterway is likely to depend on progress in US-Iran negotiations.

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