Oil jumps more than 3% on fading hopes of reopening the Strait of Hormuz

Oil prices jumped more than 3% on Monday after Iran confirmed that reopening the Strait of Hormuz requires the United States to lift sanctions imposed on it, pay compensation, and meet other conditions, according to CNN Business.

Brent crude futures rose by $3.06, or 3.66%, to $86.61 per barrel, while U.S. West Texas Intermediate crude futures climbed by $2.89, or 3.7%, to $81.07 per barrel.

The two benchmark crudes had fallen by more than 7% last week amid hopes that Iran and the Sultanate of Oman were close to reaching an agreement that would lead to the reopening of the Strait of Hormuz, through which one-fifth of the world’s oil and liquefied natural gas shipments passed before the outbreak of conflict in the Middle East in late February.

Iran stated that it was nearing a final agreement with the Sultanate of Oman to designate new shipping lanes through the strait, but reiterated that the United States must respond to other conditions—including paying compensation, ending sanctions, and halting military threats—before the strategic waterway can be reopened.

Iran and the United States are not currently holding talks. Iranian Foreign Minister Abbas Araghchi affirmed on Sunday that Tehran would not begin negotiations with Washington as long as the latter violates a temporary agreement signed in June.

Denis Kessler, Senior Vice President of Trading at BNP Paribas Financial Markets, said that crude futures recorded gains in early trading, with the possibility of a delay in a peace agreement between the United States and Iran, alongside additional strikes launched by Ukraine targeting Russian refineries and oil tankers in the Black Sea.

He added that Iran’s new demands led most traders to expect that supply shortages would persist for a longer period in the near term.