Oil prices gained modestly on Monday as Brent crude futures rose 0.02% to $88.54 per barrel while US West Texas Intermediate (WTI) crude futures slipped 0.25% to $81.27 per barrel, according to The Hindu BusinessLine. The latest price action comes as trading activity through the crucial oil passage of the Strait of Hormuz came to a near halt over the weekend, with only five commodity vessels crossing the strait on Saturday, while no such vessels were recorded on Sunday, compared with 31 crossings during the previous weekend, as shiptracking data from Kpler showed. The United Arab Emirates accused Iran of attacking a third vessel operated by ADNOC while it was transitting the strait on Friday, the Emirati state news agency WAM reported, after blaming it for two other incidents involving ADNOC vessels in the strait on Thursday evening. Iran's Deputy Foreign Minister Kazem Gharibabadi reinforced the blockade stance, stating that 'This strait will be opened and closed only under Iran's command, and so long as you do not accept the reality of defeat and stop indulging in fantasies, Iran will continue to enforce the blockade'.
The negotiating positions between the US and Iran appear to be moving further apart despite ongoing diplomatic efforts. Iranian Foreign Minister Abbas Araqchi told Iranian news outlet Shahdara News that Iran had not decided to resume talks with the US, reiterating his remarks to Iranian news outlet Shahrara News. In an interview published on Saturday, he said the US must meet conditions on the Strait of Hormuz in order for shipping to resume in the waterway. The latest developments include President Trump participating in a political rally in New York on Friday, stating that 'paying a tiny little bit more' for gasoline is worth the cost of ensuring a 'very evil country' could not have a nuclear weapon'. Trump also declared that 'After we finish defeating Iran ... pretty soon I'll be declaring the Hormuz Strait a territory of the United States', according to The Hindu BusinessLine. The disagreements center around ceasefire violations and the future of the Strait of Hormuz, with President Trump wanting Iranian reparations while Tehran wants compensation for war damage, frozen assets released and the US naval blockade lifted before fully reopening Hormuz.
Iran has continued to restrict traffic through the Strait of Hormuz, a major global oil shipping route that carried about 20% of the world's oil before the conflict, according to Reuters. The slowdown comes after both benchmarks surged more than 5% last week, following attacks on tankers operated by Abu Dhabi National Oil Company in the Strait of Hormuz and a separate attack on a Saudi Aramco refinery. The United Arab Emirates accused Iran of attacking a third vessel operated by ADNOC that was transiting the strait on Friday, the Emirati state news agency WAM reported, after blaming it for two other incidents involving ADNOC vessels in the strait on Thursday evening. Despite the disruptions, Middle Eastern oil producers are continuing to move substantial volumes of crude through the Persian Gulf, with shipments exceeding market expectations of around 4 million barrels a day. Before U.S.-Israeli attacks on Iran began in late February, the strait handled about one-fifth of global oil and liquefied natural gas supplies, as reported by The Economic Times. The US is not involved in discussions between Iran and Oman regarding the management of the Strait of Hormuz, and is unlikely to support any arrangement that fails to guarantee unrestricted passage through the waterway, making any potential agreement between Tehran and Oman largely irrelevant from Washington's perspective.
August crude oil futures were trading at ₹7,854 on Multi Commodity Exchange (MCX) during the initial hour of trading on Monday against the previous close of ₹7,870, down by 0.20%, while September futures were trading at ₹7,800 against the previous close of ₹7,810, down by 0.13%, according to The Hindu BusinessLine. The modest decline in Indian crude futures reflects the cautious market approach as Brent crude futures traded higher on Monday morning as uncertainty over efforts to end the conflict in West Asia continued. The price movements indicate that while international benchmarks show modest gains, domestic markets are taking a more measured approach to the ongoing geopolitical tensions in the Middle East.
Market analysts are warning of significant price escalation if the Strait of Hormuz disruptions continue. JPMorgan estimates that every additional month of disruption could add around $7 to $8 a barrel to Brent prices, with the bank expecting average monthly Brent prices to reach around $114 a barrel if the disruption lasts for three months. Goldman Sachs has also warned that Brent could rise to $120 a barrel if shipping disruptions through the Strait of Hormuz continue, according to The Economic Times. However, Goldman Sachs expects tensions in the Middle East to eventually ease under its base case, forecasting Brent to average $80 a barrel in the fourth quarter and $75 a barrel next year. The bank noted that risks remained tilted to the upside, as disruptions through the Strait of Hormuz and the Red Sea could last longer than expected. How long the disruption lasts will be crucial for the outlook for crude prices, with the current status quo of both sides remaining firmly dug in creating ongoing market uncertainty.
