Oil surges back to $85 per barrel as Hormuz deal remains elusive

Oil prices rebounded to $85 per barrel on Friday, despite the lack of progress in resolving the deadlock over the Strait of Hormuz. The benchmark Brent crude, which represents two-thirds of the world's oil, climbed 1.77% to $85.03 per barrel. West Texas Intermediate (WTI), a gauge tracking US crude, rose 1.83% to $79.61 per barrel.

Research analyst Soojin Kim from MUFG noted that "Brent and WTI are extending gains as Iran and Oman remain short of an agreement to restore normal shipping through the Strait of Hormuz." Ship traffic through the strategic waterway, vital for global oil supplies, remains limited, with only seven commodity vessels transiting on Sunday, according to Kpler data.

Most of these vessels followed Iran's designated route, while others avoided detection by ceasing operations. Despite multiple rounds of negotiations, a deal between Iran and the US to reopen the Strait of Hormuz remains elusive. Iran proposed six conditions for reopening, including lifting the maritime blockade on Iranian crude and withdrawing US naval and air forces from around Iran.

US President Donald Trump expressed a cautious approach, stating that the country was "low-keying it" in negotiations with Iran, citing the nation's high inflation and lack of funds. Ongoing attacks by the Yemeni Houthi rebels targeting Saudi Arabia's oil infrastructure, such as the recent assault on the Jazan refinery producing 400,000 barrels per day, are also contributing to the upward pressure on oil prices.

Analyst Kim emphasized that "with Hormuz flows still constrained and regional attacks continuing, oil prices are likely to retain a substantial geopolitical premium despite tentative diplomatic progress." Oil prices have been volatile since the conflict began on February 28, peaking at $120 a barrel in April due to concerns about supply disruptions in the Strait of Hormuz.

Following a temporary ceasefire agreement between Iran and the US in June, prices dipped but rebounded to $100 a barrel after Houthi attacks on Saudi tankers in the Red Sea. Oil experienced a significant weekly decline on Friday as the likelihood of a resolution to the conflict appeared more promising at the beginning of the week. Brent's value fell by almost 5%, while WTI declined approximately 7.7% for the week.