Key facts
- Oil prices settled higher on Monday, with Brent crude futures rising 2.65% to $90.87 and WTI crude futures gaining 2.55% to $84.50.
- Global supply concerns, fueled by pessimism over diplomatic efforts to resolve the Iran conflict, drove the price increase.
- President Donald Trump demanded Iran's surrender and threatened military action against Oman.
- A senior Iranian official warned of escalating tensions in the Strait of Hormuz.
- Shipping through the Strait of Hormuz slowed significantly over the weekend.
Oil prices settled higher on Monday, with Brent crude futures rising 2.65% to $90.87 a barrel and U.S. West Texas Intermediate crude futures gaining 2.55% to $84.50 a barrel. The increase was driven by global supply concerns exacerbated by pessimism surrounding diplomatic efforts to resolve the conflict with Iran.
President Donald Trump made strong statements, demanding Iran's surrender and threatening military action against Oman if it interfered. A senior Iranian official responded by warning of escalating tensions in the Strait of Hormuz and beyond if the U.S. did not fully implement an interim peace deal within weeks.
Analysts noted that substantial price increases are unlikely without a halt in crude flow through the Strait of Hormuz or a closure of the Bab el-Mandeb Strait. However, current prices near $90 reflect traders weighing the risk of disruptions against the potential for a resolution that could lead to a sharp price decline.
U.S. Energy Secretary Chris Wright indicated that the administration is pursuing a long-term strategy, emphasizing that Iran's current inability to export oil is part of economic pressure. Phil Flynn of Price Futures Group observed a correlation between heightened rhetoric and rising prices, with uncertainty over shipping in the Strait of Hormuz contributing to market concerns.
Last week, both oil contracts saw gains of over 5% following attacks on tankers and a refinery. Iran's Foreign Ministry spokesperson stated that talks with Oman regarding a deal to manage the Strait of Hormuz were ongoing but lengthy. Market analyst Frank Walbaum pointed out that restricted shipping and a stalemate in negotiations limit the potential for further price declines.
Data indicated a slowdown in shipping through the Strait of Hormuz over the weekend, with only five commodity vessels transiting on Saturday and none registered for Sunday, compared to 31 the previous weekend. This strait previously handled about one-fifth of global oil and LNG supplies before recent U.S.-Israeli attacks on Iran.
In other market activity, ADNOC sold at least 14 million barrels of spot crude to Asian refiners at premiums. Saudi Aramco is also offering crude oil outside the Strait of Hormuz to some Asian refiners. Meanwhile, U.S. Strategic Petroleum Reserve stocks fell by approximately 5.3 million barrels last week to their lowest level since December 1982.