Key facts
- Oil prices surged past $90 a barrel amid escalating US-Iran tensions and concerns over supply disruptions.
- The deadline for a peace deal negotiation between the US and Iran passed without resolution.
- President Donald Trump threatened military action against Oman and demanded Iran's surrender.
- Shipping traffic through the critical Strait of Hormuz slowed significantly.
- Analysts suggest current oil prices reflect the market pricing in a prolonged closure of the Strait of Hormuz.
Oil prices climbed above $90 a barrel, reaching levels not seen since late July, as geopolitical tensions between the US and Iran intensified and concerns grew over potential supply disruptions. The expiration of a two-month window for peace talks between the US and Iran on Monday, with no resolution in sight, has fueled market anxiety.
President Donald Trump, in an interview with Fox News, demanded Iran "put up the white flag of surrender" and issued a direct threat to bomb Oman if it interfered with his efforts to end the conflict. This marks the second time Trump has directed such a threat at the longtime US strategic partner.
An Iranian official indicated that the country would adopt a more aggressive military stance if negotiations with the US failed. This rhetoric was amplified by reports of a cargo ship being attacked in the Strait of Hormuz early Tuesday, according to the UK Maritime Trade Operations agency. Ebrahim Zolfaghari, the Iranian military spokesperson, also warned that vessels attempting to pass through the strait would face severe consequences.
Shipping data from Kpler revealed a significant slowdown in traffic through the Strait of Hormuz, with only six commodity ships transiting on Monday, a slight increase from five over the entire weekend. This waterway previously handled approximately one-fifth of global oil and LNG supplies. Analysts at Deutsche Bank noted that the rising oil prices indicate investors are factoring in the possibility of a more extended closure of the strait.
Tim Waterer, chief market analyst at KCM, commented that oil prices have jumped due to increasingly shaky US-Iran relations and the lack of a visible deal to reopen the Strait of Hormuz. Dan Alamariu, chief geopolitical strategist at Alpine Macro, warned that a prolonged conflict in the Middle East, combined with Russia's ongoing war in Ukraine, could lead to a "double whammy" of energy price spikes and increased volatility, particularly in the Gulf region.