Oil rises nearly 2% as Iran tempers hopes of Hormuz reopening

Oil prices experienced a 5% increase on Monday, as Iran and the United States engaged in demands for compensation, casting doubts on the possibility of reopening the Strait of Hormuz. Iran demanded that the U.S. lift sanctions and meet various conditions, while President Donald Trump stated that Iran must pay compensation for all lives lost.

Brent crude futures rose 4.99% to $87.72 per barrel, and West Texas Intermediate crude futures climbed 5.05% to $82.13. This was the steepest gain since July 29 for both contracts. Prior to the conflict, the strait carried a fifth of the world's oil and liquefied natural gas. Iran reported nearing a final agreement with Oman to define new shipping lanes, but insisted on the U.S. meeting additional conditions before reopening the vital waterway.

Iran and the U.S. are not currently in discussions, as Tehran will not initiate them while Washington remains in breach of a June interim deal. Traders believe that near-term supply constraints are more likely, given the delays in a potential deal and recent strikes by Ukraine on Russian refineries and tankers in the Black Sea. Additionally, the Houthis, aligned with Iran, attacked Saudi Aramco's Jazan refinery, prompting its restart delay to August 30.

The attacks have raised concerns about further disruptions to oil supply. Meanwhile, Ukraine's military actions have continued to target Russia's energy infrastructure, with recent strikes on oil refineries and petrochemical plants. In the U.S., the Strategic Petroleum Reserve saw a 6.1 million barrel decrease, reaching its lowest level since 1983.