Oil Exceeds $89: Stalled Talks and Strait Blockade
Traffic through the Strait of Hormuz has drastically decreased, and Tehran has yet to decide whether to return to the negotiating table with the US.
Traffic through the Strait of Hormuz has drastically decreased, and Tehran has yet to decide whether to return to the negotiating table with the US.
Global markets on Monday saw crude oil prices rise above $89 per barrel, driven by a stalemate in diplomatic efforts to end the conflict in the Middle East and limited traffic through the Strait of Hormuz. On the London market, a barrel was trading at $89.44 before noon, up 92 cents from Friday's closing price, according to data reported by Lider.
On the US market, prices rose by 55 cents to reach $82.95 per barrel. Last week, both markets saw gains of more than five percent following attacks on tankers belonging to the UAE state company ADNOC and a refinery of Saudi state company Saudi Aramco in the Strait of Hormuz.
Iranian Foreign Minister Abbas Araghchi said over the weekend that Iran has not yet decided whether to resume talks with the United States. Meanwhile, US President Donald Trump called on citizens to accept slightly higher gasoline prices while the conflict continues.
Iranian Foreign Ministry spokesman Ismail Baghaei stated that negotiations remain active and are dragging on due to the complexity of the issue, the involvement of multiple parties, and the actions of countries attempting to obstruct the process.
Market analyst at trading platform Naga.com, Frank Walbaum, warned that two key factors have limited the room for price declines. "Navigation through the Strait of Hormuz remains restricted, and talks have hit a wall, and both these facts limit the possibility of further declines (in prices)," Walbaum said, adding that without new disruptions, prices could stabilize near current levels.
Shipping data reveals a sharp drop in activity following last week's attacks on tankers. On Saturday, only five commercial vessels passed through the Strait of Hormuz, while on Sunday no transits were recorded. A week earlier, 31 commercial ships passed through the same passage.
Before the start of US-Israeli strikes on Iran on the last day of February, approximately one-fifth of the world's oil and liquefied natural gas supplies passed through this strait daily. The Organization of the Petroleum Exporting Countries (OPEC) stated in its calculations that a barrel of its members' oil basket stood at $85.43 on Friday, up 23 cents from the previous day.
Bjarne Schieldrop from SEB Research estimated that prices are unlikely to rise significantly for now, unless there is a complete halt of shipments through the Strait of Hormuz or the closure of the Bab el-Mandeb Strait. Traders are currently weighing the risk of deeper disruptions and shortages against the scenario of reopening the strait, which would lead to a sharp drop in prices, Schieldrop explained.
