Oil jumps as Iran-US relations deteriorate and Hormuz shipping stalls

Oil prices rose on Tuesday, August 18, as prospects for a deal to end the Middle East war weakened, with Iran signalling a shift to a more offensive military posture and the United States ruling out an extension of a temporary ceasefire. The developments heightened concerns over potential disruptions to energy supplies.

A senior Iranian official told Reuters on Monday that Iran would adopt a “fully offensive” military posture as efforts to secure a permanent end to the war stalled. Washington, meanwhile, ruled out extending the temporary ceasefire agreement.

Brent crude futures rose 62 cents, or 0.7%, to $91.49 a barrel by 0408 GMT, after climbing on Monday to their highest level since July 30.

U.S. West Texas Intermediate crude futures gained 75 cents to $85.25 a barrel. Earlier in the session, WTI had risen more than 1% to $85.37, its highest since July 31.

Progress toward a peace agreement and the resumption of oil tanker traffic through the strategic Strait of Hormuz have stalled, raising the prospect of a prolonged conflict that began when the United States and Israel launched attacks on Iran on February 28.

“Oil has jumped to start the week as U.S.-Iran relations look increasingly shaky,” said Tim Waterer, chief market analyst at KCM.

“A deal to reopen the Strait of Hormuz still does not appear to be in sight, and shipping numbers remain at a trickle.”

A projectile struck a vessel transiting out of the Strait of Hormuz on Tuesday, marking the latest in a series of attacks that have kept the number of crossings in the single digits, despite a slight increase from levels recorded over the weekend, according to tracking data.

In a separate development, Yemen’s Houthis launched missiles at vessels they described as a Saudi military ship and four escort vessels in the Red Sea, the group’s military spokesperson, Yahya Saree, said on Telegram.

The continuing uncertainty over a ceasefire agreement could keep pressure on oil prices in the months ahead.

“The lack of any kind of deal will have an impact on oil price expectations further out in 4Q and even in 2027,” said Suvro Sarkar, head of energy research at DBS Bank.

While uncertainty over a deal persists, Sarkar expects oil prices to trade in a range of $80 to $100 a barrel in the near term.

By Tamilla Hasanova