Strait of Hormuz Shipping Outlook Remains Uncertain as Iran-Oman Talks Stall and Saudi Refinery Attack Boosts Oil Prices
Oil prices extended their rally on Monday, driven by ongoing uncertainty over the reopening of the Strait of Hormuz and a fresh attack on a Saudi refinery. After gaining more than 5% over the previous three sessions, Brent crude futures rose over 2% to $84.37 per barrel, while West Texas Intermediate (WTI) crude futures traded at $78.75 per barrel.
Iranian Foreign Minister Abbas Araghchi said over the weekend that Tehran and Oman were "very close" to reaching an agreement on a new shipping route through the Strait of Hormuz. However, he reiterated that establishing a new route does not mean the strait itself will be reopened, dampening hopes for a swift resumption of energy transit in the Middle East. According to reports, Iran's Supreme National Security Council Secretary Ali Shamkhani stated that the strait will remain closed unless the United States changes its behavior. Iran has set five conditions for reopening the strait, including a permanent halt to U.S. military actions against Iran and its regional allies, an end to threats or insults against Iran, the lifting of the U.S. naval blockade and all sanctions, the return of frozen Iranian assets, and compensation for damages caused by U.S. military operations. Iran has ruled out direct talks with the U.S., citing repeated violations of short-term temporary peace agreements. Araghchi said mediators are still working to find a path to restart negotiations, but Tehran sees no possibility for talks until the U.S. stops violating the memorandum of understanding and remedies its breaches.
U.S. President Donald Trump, meanwhile, signaled a patient approach, saying in an interview on Sunday that the U.S. is currently "handling it quietly." This came after weeks of Trump threatening large-scale military strikes on Iran, followed by a retreat. In addition, Yemen's Houthi rebels, backed by Iran, claimed responsibility for an attack on a Saudi refinery in Jizan. Over the weekend, an oil tanker operated by the Abu Dhabi National Oil Company was also attacked near the Strait of Hormuz. The risk of renewed conflict in the Middle East remains high, keeping markets on edge. Haris Khurshid, Chief Investment Officer at Chicago-based Karobaar Capital LP, noted, "As long as the market is pricing in the 'possibility' of supply disruptions rather than certainty of a return to normalcy, the trend will remain bullish. Until we see actual flow volumes returning to normal, I believe geopolitical risks will continue to support crude oil prices."
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