Oil jumps past $91 as Iran war keeps Hormuz oil flows in limbo amid stalled diplomacy

• US WTI crude futures hit highest since July 31.
• Trump responds to Iran-Oman talks with threats to bomb Oman.
• Media reports say Trump has opened back-channel talks with IRGC.

Oil prices rose on Tuesday as a agreement to end the Middle East war seemed further out of sight, with Iran saying it will adopt a more offensive stance and the US ruling out extending a ceasefire agreement, heightening worries about energy supply.

As Washington ruled out extending a temporary ceasefire agreement, iran will shift to a “fully offensive” military posture because efforts to negotiate a permanent end to the war with the US have stalled, a senior Iranian official informed Reuters on Monday.

Outward progress towards peace talks and a resumption of oil tanker traffic through the strategic Strait of Hormuz has ground to a halt, threatening to extend the conflict that the US and Israel rolled out with attacks on Iran on February 28.

What happened

After rising to their highest since July 30 on Monday, brent crude futures climbed 27 cents, or 0.3%, to $91.14 by 0003 GMT.

After gaining more than 1% earlier in the session to $85.37, their highest since July 31, US West Texas Intermediate crude futures CLc1 were up 42 cents to $85.04 a barrel.

“Oil has jumped to start the week as US-Iran relations look increasingly shaky. A deal to reopen the Strait of Hormuz still does not appear to be in sight, and shipping numbers remain at a trickle,” stated chief market analyst at KCM, Tim Waterer.

Following attacks on tankers, only five commodity vessels transited the Hormuz strait on Saturday, with none registered for Sunday, ship-tracking data from Kpler demonstrated, versus 31 in the prior weekend.

The details

Yemen’s Houthis attacked what they described as a Saudi military ship and four escort vessels in the Red Sea with missiles, according to the group’s military spokesperson Yahya Saree on Telegram.

“The dual chokehold on the Strait of Hormuz and the Bab el-Mandeb remains highly significant. These are not secondary concerns. They sit at the centre of the current supply-risk narrative,” KCM’s Waterer said.

Iran has separately been negotiating an agreement on managing the strait with Oman and says they are close to a agreement. But Trump responded to those negotiations with a threat to bomb the Gulf state, a longstanding US security partner.

In a glimmer of hope for diplomacy, though, media reports said Trump had opened back-channel discussions with the Islamic Revolutionary Guard Corps.

Why it matters

US crude oil stockpiles were expected to have fallen last week alongside product inventories, a preliminary Reuters poll demonstrated on Monday.