Oil pops on Hormuz jitters; U.S. emergency crude stocks fall below 300 mln barrels

Oil prices surged nearly 5% on Monday after Iran dismissed the prospect of direct talks with the U.S. and vowed a complete reopening of the Strait of Hormuz would only occur if Washington met certain demands. The rise in oil prices coincided with a steep decline in Iran-backed attacks on Saudi Arabian energy infrastructure, adding to worries over regional oil supplies.

Brent crude futures for October and U.S. West Texas Intermediate crude futures for September both jumped by 4.8% and 5% respectively, reaching $87.56 and $82.06 a barrel each. The surge in oil prices came after weekly declines, primarily due to claims by U.S. officials, including President Donald Trump, that negotiations with Iran were ongoing.

However, this optimism was dampened by Iran's continuous rejection of Washington's negotiation proposals and reports that the Strait of Hormuz's management framework would prohibit passage for U.S., Israeli, and other hostile vessels.

Iran's state media reported that a parliamentary commission had approved a new framework for the Strait of Hormuz, which included a ban on hostile vessels. However, Foreign Ministry spokesperson Esmaeil Baqaei stated that Iran and Oman had not finalized a joint statement on the management of the strait. The plan reportedly would include mechanisms to monitor vessel passage, for which compensation would be required.

Iran also ruled out direct negotiations with the U.S. for now, citing alleged breaches of the interim peace agreement reached in June. Tehran reiterated its conditions for the full reopening of the Hormuz, including an end to the U.S. naval blockade, the removal of sanctions, and compensation for war damage. President Trump claimed Iran was seeking compensation for the deaths of civilians and protesters since the U.S.-Israeli joint attack on Tehran at the end of February. He instructed his representatives to include these demands in future negotiations.

Vice President Kamala Harris said Washington was "talking to the Iranians" regarding the situation. Axios reported that Trump was willing to allow economic pressure to build on Iran rather than launching a new military offensive. "We are only semi-negotiating with them. We are just watching Iran with its huge inflation and the fact they have no money," the president said on his Truth Social service.

Deutsche Bank's Jim Reid noted that Iran's latest political and security moves suggested Tehran was attempting to balance a tougher domestic stance with a continued search for a diplomatic solution. The appointment of former Revolutionary Guard commander Mohsen Rezaee to head the Supreme National Security Council was seen as reinforcing hard-line influence, even as Iranian officials insisted they were close to an agreement with Oman on a new shipping framework through the Strait of Hormuz.

Foreign Minister Abbas Araghchi described the talks as being in their final stages, but Tehran insisted any technical agreement on shipping routes would not automatically lead to a full reopening of the waterway. Hormuz traffic continued to decline amid uncertainty over its management, with confirmed vessel crossings falling from 15 on Friday to six on Sunday. The U.S. Navy maintains control of the strait, which was described as a "steel wall" by Trump.

Despite these developments, supply risks were partially eased after Ukraine agreed not to target non-Russian oil tankers and critical energy infrastructure in the Black Sea, which is vital for Kazakhstan's crude exports. The Caspian Pipeline Consortium terminal has faced repeated attacks, putting roughly 1.8 million barrels per day of Kazakhstan's exports at risk.

Meanwhile, the U.S. Department of Energy reported that crude inventories in the Strategic Petroleum Reserve (SPR) had fallen to 298.7 million barrels by the week of August 7, marking the first time the SPR had fallen below 300 million barrels since January 1983.