Oil Surges 4% Amid Uncertainty Over Key Hormuz Shipping Strait Reopening
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Oil prices rebounded by 4% on Monday, recovering from a sharp weekly decline, as Iran dismissed the possibility of direct negotiations with the U.S. and asserted that the Strait of Hormuz would not fully reopen unless Washington fulfills specific demands.
Adding to supply anxieties, attacks by Iran-aligned Houthi rebels on Saudi Arabian energy infrastructure raised further concerns over oil transit in the region.
By 12:32 ET (16:32 GMT), the global benchmark crude contract expiring in October rose 4% to settle at $86.85 per barrel, while the September contract gained 3.9% to reach $81.30 per barrel.
Crude prices had dropped last week following comments from U.S. officials, including President Donald Trump, suggesting that discussions with Iran were ongoing. However, these losses were pared late in the week as Tehran repeatedly denied those claims and reports emerged that a new management framework for the Strait of Hormuz would block U.S., Israeli, and other hostile vessels from passing through the strategic waterway.
According to Iranian state media, a parliamentary commission approved the framework, including the vessel restrictions. Foreign Ministry spokesperson Esmaeil Baqaei clarified on Monday that Iran and Oman have not yet finalized their joint statement on managing the strait, noting that the proposed plan features monitoring mechanisms and transit fees.
Tehran ruled out direct talks with Washington for the time being, pointing to alleged U.S. violations of June’s interim peace agreement. Iran maintained that a complete reopening of the strait depends on the lifting of the U.S. naval blockade, the removal of sanctions, and financial compensation for war damages.
President Trump responded on Monday, noting that Iran is demanding reparations dating back to the start of the joint U.S.-Israeli military operations against Tehran in late February.
“I am likewise demanding compensation from Iran, for all of the people that they have killed and gravely wounded with their roadside bombs and many conflicts…Additionally, compensation should be paid to the families of the hundreds of thousands of innocent protestors that Iran has killed over the last 50 years, not to mention the 52,000 that have been killed in the last five months,” Trump posted on Truth Social, adding that he has instructed his team to include these demands in any future talks.
Meanwhile, U.S. Vice President JD Vance confirmed to Fox News over the weekend that Washington remains in communication with the Iranians.
A report from Axios on Sunday suggested that Trump prefers to let economic pressure build on Iran rather than launching a new military campaign. The publication quoted the president as saying, “We are only semi-negotiating with them. We are just watching Iran with its huge inflation and the fact they have no money.”
Jim Reid, a strategist at Deutsche Bank, observed that the geopolitical situation remains highly delicate. “Tehran is trying to balance a tougher domestic posture with a continued search for a diplomatic off-ramp,” Reid said, noting that the appointment of hardliner Mohsen Rezaee, a former Revolutionary Guard commander, to lead the Supreme National Security Council signals a firm stance, even as diplomats negotiate shipping terms with Oman.
Reid added that while Iranian Foreign Minister Abbas Araghchi described the shipping talks as being in their final stages, Tehran has made it clear that a technical shipping agreement will not automatically result in the waterway fully reopening.
Amid the ongoing diplomatic standoff, shipping activity through the Strait of Hormuz has slowed. Data from Kpler showed that confirmed vessel transits dropped from 15 on Friday to 11 on Saturday, and fell to just six on Sunday.
In contrast, traffic through the Bab el-Mandeb Strait remained steadier, with 43 crossings on Friday, 37 on Saturday, and 36 on Sunday. However, security risks persist in the area after Houthi forces claimed responsibility for a major military strike targeting Saudi Arabian depots in the Al-Makha region, following a prior drone strike on a Saudi Aramco refinery in Jizan, where authorities successfully extinguished a resulting fire.
On a more positive note for global supply, some risks subsided after Ukraine pledged not to target non-Russian oil tankers and critical Black Sea energy infrastructure used for Kazakhstan’s crude exports. The Caspian Pipeline Consortium terminal, which handles approximately 1.8 million barrels per day of Kazakh oil, had repeatedly come under threat in recent weeks.
