Oil Climbs 1% as US-Iran Deal Hopes Fade, Hormuz Closure Persists

By Adedapo Adesanya

Oil was up by 1 per cent on Tuesday as doubts about a potential United States-Iran peace deal fueled concerns that Middle East supply disruptions would persist.

As a result, Brent futures rose by $1.19 or 1.4 per cent ‌to $88.91 a barrel, while the US West Texas Intermediate (WTI) futures expanded by $1.07 or 1.3 per cent to $83.20 per barrel.

Both contracts had jumped about 5 per cent on Monday as hopes for a peace deal between the US and Iran started to fade.

It looked worse on Tuesday when Iran said the Strait of Hormuz will remain closed unless the US ends the war and meets Iran’s conditions, raising the bar for a deal that would restore more oil traffic through the key waterway. About 20 per cent of global oil supply passed through the strait before the start of ⁠the Iran war on February 28.

Mr Mohsen Rezaei, secretary of Iran’s Supreme National Security Council, said it has also delivered additional conditions to the US through mediators.

US officials had suggested last week that negotiations involving Iran and Oman were making progress toward allowing more vessels through Hormuz.

Shipping traffic through the Strait of Hormuz fell sharply on Monday as tensions continued to disrupt maritime activity across the Middle East.

Shipping data showed that only six vessels passed through the strategic waterway on Monday, below the 10-day average of about 11 vessels. Before the conflict, daily traffic through the strait averaged between 125 and 140 vessels.

The disruption comes amid heightened security concerns across key regional shipping routes.

In the Bab el-Mandeb, Yemen’s Iran-aligned Houthis attacked a Saudi vessel carrying military equipment, according to the Houthi-run Saba news agency.

Separately, Reuters reported a missile attack on a container ship off Pakistan in what was suspected to be a US strike, further underscoring the security risks facing commercial shipping in the region.

The disruption to regional maritime traffic has also raised concerns about the recovery of oil production in the Middle East.

The US Energy Information Administration (EIA) said on Tuesday that some oil producers in the region could struggle to restore output to pre-conflict levels by the end of 2027, even if shipping and trade patterns return to normal by early next year.

The outlook highlights the potential for prolonged disruptions to global oil supplies despite a possible normalisation of trade flows in the coming months.

In Libya, a member of the Organisation of the Petroleum Exporting Countries (OPEC), renewed violence in the strategic city of Zawiya has disrupted the oil industry, with state oil firm the National Oil Corporation saying it could declare force majeure if drone attacks on energy assets in the city continued.

In Europe, the Ukrainian military said ⁠on Tuesday it attacked an oil refinery in the Russian city of Orsk, the second-largest city in the Orenburg region and an important industrial hub.

The combination of Ukraine’s attacks on Russian energy infrastructure and the Iran war has limited global supplies and ​boosted global energy prices.