Oil Climbs for Third Session as US-Iran Diplomacy Stalls; Strait of Hormuz Uncertainty Persists
Key Takeaways
- •Oil prices climbed for a third consecutive session amid stalled US-Iran diplomacy and unresolved uncertainty over the Strait of Hormuz, a passageway carrying roughly one-fifth of global oil consumption.
- •President Trump characterized the negotiations with Iran as limited, stating the US is monitoring Iran's economic difficulties including high inflation and financial constraints.
- •The Institute for the Study of War assessed that Iran is demanding sanctions relief, an end to the US naval blockade, troop withdrawals from positions around Iran, and the release of frozen assets before fully reopening the Strait of Hormuz.
- •Iranian Foreign Minister Abbas Araghchi indicated that Iran and Oman are close to finalizing a temporary transit arrangement for certain vessels, though a complete reopening remains contingent on additional conditions.
- •Israel rejected a 15-point Gaza plan proposed by Trump, with Prime Minister Netanyahu maintaining that no military withdrawal will occur until Hamas is genuinely disarmed.
Oil prices opened the new week higher, marking a third consecutive session of gains, after optimism surrounding a potential peace agreement between the United States and Iran stalled over the weekend and uncertainty over the Strait of Hormuz continued. The strait is one of the world's most critical energy chokepoints, with roughly a fifth of global oil consumption transiting it on a typical day, making any disruption to shipping there a direct factor in price formation.
President Donald Trump said the US is "low-keying it" with Iran and that the two sides were "only semi-negotiating with them." "We are just watching Iran with its huge inflation and the fact they have no money," Trump said (Truth Social).
The diplomatic slowdown follows Israel's rejection of a 15-point plan for Gaza put forward by Trump. Israeli Prime Minister Benjamin Netanyahu stated that the country's military "will not carry out any withdrawal until Hamas is genuinely disarmed."
Meanwhile, the Institute for the Study of War (ISW) assessed that Iran is seeking further concessions from the US before agreeing to a full reopening of the Strait of Hormuz. The think tank said Iran would use both "messaging and force to signal its continued intent" to control maritime traffic through the waterway.
Iranian Foreign Minister Abbas Araghchi said over the weekend that Iran and Oman are close to agreeing on a temporary transit route through the strait for select vessels, but he emphasised that a full reopening of the waterway remained subject to "other conditions."
According to the ISW, senior Iranian officials have tied any reopening to a set of demands, including sanctions relief, the lifting of the US naval blockade, the withdrawal of troops from positions around Iran, and the release of frozen assets.
The ISW also noted that the US blockade is "imposing high costs on Iran's oil exports and broader economy," but added that the pressure has not yet prompted Iranian decision-makers to soften their stance on the strategic waterway. The standoff leaves oil markets contending with the prospect that one of the largest supply routes could remain partially constrained while two of the region's major actors remain far apart on terms for de-escalation.