Oil prices climbed more than 2% on Tuesday to their highest levels in over a week as expectations for a U.S.-Iran agreement weakened, keeping concerns over restricted energy flows through the Strait of Hormuz firmly in focus.
Brent crude futures rose $1.92, or 2.19%, to $89.64 a barrel by 0805 GMT, while U.S. West Texas Intermediate crude futures gained $1.91, or 2.33%, to $84.04. Both benchmarks reached their highest levels since July 31.
The latest advance extended Monday’s rally, when both contracts surged more than 5% after President Donald Trump responded to Iran’s conditions for a peace agreement with demands that Tehran compensate people killed in wars, attacks and protests.
The exchange has added another obstacle to efforts to reach an agreement that could allow the Strait of Hormuz to reopen.
Trump later said the United States had control of the strait and had cleared the strategically important oil route of Iranian mines.
Strait of Hormuz disruption keeps pressure on supply
Saxo Bank head of commodity strategy Ole Hansen said, “There’s no clear path to a solution and to a full reopening of the strait at this point in time and that’s adding renewed upside pressure on prices,” adding that supply disruption remains meaningful.
Shipping figures underline the continued restrictions. Only six vessels passed through the Strait of Hormuz on Monday, compared with a 10-day average of around 11.
Barclays analysts said in a Monday note that net exports of crude oil and refined products through the strait averaged 3 million barrels per day in the week ending August 7, down from 4.4 million bpd during the previous week.
Before the Iran conflict began in late February, approximately one-fifth of the world’s daily oil and liquefied natural gas supplies travelled through the Strait of Hormuz.
Jazan refinery delay adds to regional energy concerns
Further uncertainty emerged after Saudi Aramco postponed the restart of its 400,000-barrel-per-day Jazan refinery until August 30 following two attacks on the facility claimed by the Houthis on Sunday.
The development adds another potential constraint to regional energy flows alongside disruption around the Strait of Hormuz.
Tim Waterer, chief market analyst at KCM Trade, said, “The chokehold risk around both the Strait of Hormuz and the Bab el-Mandeb remains highly significant. Even intermittent restrictions or the threat of further incidents keep insurance costs elevated and force longer shipping routes … hence energy flows look likely to stay constrained near term.”
ADNOC seeks alternative routes for crude sales
Abu Dhabi National Oil Company, or ADNOC, is meanwhile offering spot crude through another tender as it works to move supplies originating from inside the Strait of Hormuz.
The latest offering is the company’s eighth tender since the beginning of June.
With diplomatic progress between Washington and Tehran uncertain and key regional shipping routes remaining disrupted, oil markets continue to price in risks surrounding the availability and transportation of Middle Eastern energy supplies.