U.S. crude oil prices surged nearly 8% on Monday following reports from Iranian state media that Tehran would suspend negotiations with the United States and completely seal off the Strait of Hormuz in response to Israel's military actions in Lebanon.
As of 10:07 a.m. ET, West Texas Intermediate (WTI) crude futures were up 7.8% at $94.20 per barrel, while the international benchmark Brent crude futures rose 6.7% to $97.23 per barrel.
Iran's Tasnim News Agency stated on social media that Iranian negotiators would not hold any talks with the U.S. until Israel ceases its attacks in Gaza and Lebanon and withdraws from occupied Lebanese territories.
The agency further reported that Tehran would completely block the Strait of Hormuz and take action on other fronts, such as the Bab el-Mandeb Strait, a crucial trade chokepoint connecting the Red Sea and the Gulf of Aden.
This development follows a week where Brent and WTI crude fell 11.1% and 9.6%, respectively, marking their worst weekly performance since mid-April. Despite this, both contracts remain up approximately 30% since the U.S.-Israel joint military action against Iran began on February 28, 2026.
Markets are on edge as U.S.-Iran airstrires resumed over the weekend and Israel ordered troops deeper into Lebanon, raising fears that escalating conflict with Iran-backed Hezbollah could shatter the fragile ceasefire between Washington and Tehran.
Israeli Prime Minister Benjamin Netanyahu welcomed the army's capture of Beaufort Castle in southern Lebanon, calling it a "decisive turning point" against Hezbollah's ground offensive, a move strongly criticized by European officials.
Former U.S. President Donald Trump commented on social media Monday, stating Iran "genuinely wants a deal" and insisting any agreement would benefit America and its allies. He posted on Truth Social, "Wait and see, it will all work out fine — it always does!"
The renewed airstrikes over the weekend saw both sides claiming to have hit military targets near the Strait of Hormuz, a narrow waterway that handles about 20% of global seaborne oil trade.
Negotiations to end the Iran conflict have made little progress in recent weeks, with both sides locked in a fragile ceasefire stalemate since early April.
Uncertainty Over a Deal
A report by Axios on Saturday, citing two anonymous U.S. officials, indicated that Trump had demanded several changes to the latest terms negotiated by envoys, primarily concerning Iran's nuclear materials. CNBC could not independently verify the report.
Jorge León, Head of Geopolitical Analysis at Rystad Energy, noted that oil traders are currently pricing in expectations for some form of deal in the coming weeks but warned that a breakdown in talks could send prices soaring to $180 per barrel by August.
"If we assume no deal and a resumption of the U.S.-Iran war, oil could reach $180 per barrel in August, which would trigger a severe global economic recession, particularly in Europe and emerging Asian markets," León stated Monday on CNBC's "Squawk Box Europe."
"An alternative scenario: a sudden, comprehensive U.S.-Iran agreement, including on nuclear issues and reopening the Strait of Hormuz, could see prices quickly fall back to around $70 per barrel by year-end," he added.
Goldman Sachs noted that its forecasts for Q4 2026 Brent and WTI crude ($90 and $83 per barrel, respectively) face two-way risks: persistent Middle East supply disruptions could push prices higher, while weak demand poses significant downside pressure.
The bank estimates that weak April oil retail data from China and Western Europe implies a downside risk of about 2 million barrels per day to its already lowered demand expectations.
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