Oil prices experienced a sharp increase on Monday following announcements from Iran that it would suspend talks with the United States and completely close the Strait of Hormuz.
By 10:07 a.m. Eastern Time, U.S. West Texas Intermediate crude futures had risen by 7.8% to $94.20 per barrel, while the international Brent crude benchmark increased by 6.7% to $97.23 per barrel.
The surge came after Iran's official Tasnim news agency stated that its negotiators would not engage in talks with the U.S. unless Israel ceased its attacks in Gaza and Lebanon and withdrew from occupied territories in Lebanon.
Tasnim further reported that Tehran would completely block the Strait of Hormuz and take action on other fronts, including the Bab el-Mandeb Strait, a crucial trade chokepoint connecting the Red Sea to the Gulf of Aden.
This price movement follows a difficult week for oil, with Brent and WTI recording their worst weekly performances since mid-April, falling 11.1% and 9.6% respectively.
Despite the recent decline, both contracts have still gained approximately 30% since the outbreak of conflict involving the U.S. and Israel against Iran on February 28.
Over the weekend, renewed airstrikes by the U.S. and Iran, coupled with Israel's order for its military to advance deeper into Lebanon, have reignited concerns that clashes between Israel and Iran-backed Hezbollah could threaten the fragile ceasefire between Washington and Tehran.
Israeli Prime Minister Benjamin Netanyahu welcomed his forces' capture of the Beaufort Castle in southern Lebanon, reportedly describing it as a "decisive turn" in the expanding ground campaign against Hezbollah, a move strongly criticized by European officials.
Former U.S. President Donald Trump commented via social media that Iran "really wants to make a deal" and insisted it would be a good agreement for Washington and its allies, suggesting that matters would resolve themselves.
Prior airstrikes over the weekend by both nations targeted military objectives near the Strait of Hormuz, a narrow waterway that typically handles about 20% of global oil shipments.
Talks aimed at ending the conflict have seen little progress in recent weeks, with both sides remaining in an uneasy ceasefire since early April.
Uncertainty persists in the markets.
A recent report indicated that the former U.S. president had requested multiple changes to the latest terms negotiated by his envoys with Iranian officials, with demands reportedly focused on issues including Iran's nuclear materials.
According to a geopolitical analyst at Rystad Energy, oil traders appear to be pricing in the possibility of some form of agreement in the coming weeks.
He warned, however, that if peace talks collapse, oil prices could potentially surge to $180 per barrel by August, a scenario that would imply a severe global economic recession, particularly in Europe and emerging Asia.
An alternative scenario was also presented, where a sudden U.S.-Iran agreement on all issues, including nuclear concerns and reopening the Strait of Hormuz, could see oil prices rapidly fall back to around $70 per barrel by year-end.
Goldman Sachs stated that its price forecasts for Brent and WTI for the fourth quarter of 2026 are $90 and $83 per barrel, respectively, but noted that risks are currently "two-sided."
The bank warned that while ongoing supply disruptions in the Middle East could push prices higher, weak demand also presents a significant downside risk.
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