Oil prices rebounded sharply on Monday, climbing nearly 5%, after Iran ruled out direct negotiations with the United States and stated that a full reopening of the Strait of Hormuz would depend on Washington meeting specific conditions. The rally followed a steep weekly decline of more than 7% in crude benchmarks.

At 15:40 ET (19:40 GMT), Brent crude futures for October delivery — the global oil benchmark — rose 4.8% to $87.56 a barrel. U.S. West Texas Intermediate futures for September delivery gained 5% to $82.06 a barrel.

The Strait of Hormuz is the world's most important oil transit chokepoint, typically carrying roughly 20 million barrels per day of crude and refined products — about a fifth of global oil demand. Any sustained disruption to flows through the waterway would affect shipments from major Gulf producers including Saudi Arabia, the UAE, Kuwait, Iraq, and Qatar.

Separately, Iran-backed Houthi attacks on Saudi Arabian energy infrastructure intensified concerns over regional oil flows. Government data also showed U.S. emergency crude stockpiles fell below 300 million barrels for the first time since January 1983.

Weekly Losses Tempered by Tehran's Rejection of Negotiation Claims

Crude benchmarks had slumped the previous week, driven largely by assertions from U.S. officials — including President Donald Trump — that talks with Iran were progressing. Those losses were partially reversed toward the end of the week as Tehran repeatedly rejected Washington's claims of ongoing negotiations and reports emerged that the Strait of Hormuz's proposed management framework would bar passage to U.S., Israeli, and other vessels deemed hostile.

Iranian state media reported that a parliamentary commission had approved the framework, including the vessel ban. Foreign ministry spokesperson Esmaeil Baqaei said Monday that Iran and Oman had not yet finalized a joint statement on managing the strait. He added that the plan would include mechanisms to monitor vessel passage, for which compensation should be paid.

Iran also ruled out direct talks with the U.S. for now, citing alleged violations of the interim peace agreement reached in June. Tehran reiterated its conditions for a full reopening of Hormuz: an end to the U.S. naval blockade, removal of sanctions, and compensation for war damage.

Trump Demands Counter-Compensation from Iran

Trump said Monday that Iran was seeking compensation for damages incurred since the start of the U.S.-Israeli joint assault on 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 wrote on his Truth Social platform.

"I have instructed my representatives to put this firmly into any, and all, future negotiations," he added.

U.S. Vice President JD Vance told Fox News over the weekend that Washington was "talking to the Iranians, of course."

Axios reported Sunday that Trump was prepared to allow economic pressure to mount on Iran rather than ordering a new military offensive. "We are only semi-negotiating with them. We are just watching Iran with its huge inflation and the fact they have no money," Axios quoted the president.

Analyst: Tehran Balancing Domestic Posture with Diplomatic Search

Jim Reid of Deutsche Bank offered the following assessment: "The situation in Iran remains finely balanced with Iran's latest political and security moves suggesting that Tehran is trying to balance a tougher domestic posture with a continued search for a diplomatic off-ramp."

"The appointment of former Revolutionary Guard commander Mohsen Rezaee to head the Supreme National Security Council reinforces hard-line influence at the centre of decision-making, even as Iranian officials insist they are close to an agreement with Oman on a new shipping framework through the Strait of Hormuz," Reid said.

"Foreign Minister Abbas Araghchi has described the talks as being in their final stages, but Tehran has stressed that any technical agreement on shipping routes would not by itself lead to a full reopening of the waterway," he added.

Hormuz Traffic Declines; Red Sea and Black Sea Disruptions Continue

Amid the uncertainty over the strait's management, traffic through the chokepoint continued to fall. According to data from Kpler, confirmed vessel crossings dropped from 15 on Friday to 11 on Saturday and just six on Sunday.

Trump told reporters Monday: "The only one that has control of the Strait of Hormuz right now is the United States Navy. We have a blockade that's been infallible—it's a steel wall…We control the strait, 100%."

Kpler also reported that traffic through the Bab el-Mandeb Strait remained significantly more active over the same period, with 43 confirmed crossings on Friday, 37 on Saturday, and 36 on Sunday. However, threats to the shipping corridor remained elevated from Iran-backed Houthis in Yemen, who claimed a "broad and qualitative military operation" against Saudi Arabian depots in the Al-Makha area. The Houthis had earlier claimed to have targeted a Saudi Aramco refinery in Jizan. Saudi Arabia separately confirmed that a fire at the refinery had been extinguished following the attack.

The simultaneous pressure on Hormuz and Bab el-Mandeb — through which a significant share of trade between Europe and Asia transits — has raised concerns about compounding disruptions to global energy shipping routes. The Bab el-Mandeb Strait connects the Red Sea to the Gulf of Aden and is a critical link for vessels traveling to and from the Suez Canal.

Some supply risks eased after Ukraine agreed not to target certain non-Russian oil tankers and Black Sea energy infrastructure critical to Kazakhstan's crude exports. The Caspian Pipeline Consortium terminal has faced repeated attacks in recent weeks, jeopardizing roughly 1.8 million barrels per day of Kazakhstan's exports.

U.S. Strategic Petroleum Reserve Hits Four-Decade Low

The U.S. Department of Energy reported Monday that crude inventories in the Strategic Petroleum Reserve (SPR) fell in the week of August 7 to 298.7 million barrels — the first time SPR stocks have dropped below 300 million barrels since January 1983. The facility, designed to cushion the U.S. economy against severe supply disruptions, held over 638 million barrels as recently as 2010.

The drawdown is part of an agreement by the Trump administration to release 172 million barrels over four months from the facility in an effort to keep oil prices in check. The sustained drawdown means the reserve's capacity to offset future supply shocks is diminishing even as geopolitical risks to global oil flows remain elevated.

Source: Investing.com