Oil climbs 5% as Iran, US both demand compensation and Hormuz hopes fade

Brent crude futures surged 4.99%, closing at US$87.72 a barrel on Monday (Aug 10), while US West Texas Intermediate crude futures rose 5.05%, settling at US$82.13. This marked the steepest gains since July 29 for both contracts. The upward trend was fueled by Iran and the United States trading demands for compensation, which cast doubt on reopening the Strait of Hormuz.

Iran demanded that the US lift sanctions and meet numerous other conditions, while US President Donald Trump insisted Iran compensate for the lives lost and injuries caused. The percentage gain was driven by hopes that Iran and Oman would finalize a deal to establish new shipping lanes through the strait, which had carried nearly a fifth of global oil and liquefied natural gas before the Middle East conflict began in late February.

Despite Iran reportedly nearing a deal with Oman, US and Iranian negotiations remain stalled until Washington ends its sanctions and military threats. Meanwhile, Iran-aligned Houthis attacked Saudi Aramco's Jazan refinery, prompting a restart delay until Aug 30. Additionally, Ukraine's military continued targeting Russia's energy infrastructure.

US crude oil reserves in the Strategic Petroleum Reserve dropped to their lowest level since January 1983 last week, indicating tighter supplies.