Oil prices rise as attacks dent hopes for Strait of Hormuz reopening

Oil prices climbed as hostile acts targeting vessels in the Middle East raised questions about the likelihood of resolving talks aimed at reopening the Strait of Hormuz. Brent crude surged more than 2 percent overnight into Wednesday, nearing $90 a barrel. Brent futures for October delivery were at $89.61 as of 03:00 GMT, a 24 percent increase from before the US-Israel war on Iran that began in late February.

Tim Waterer, chief market analyst at KCM Trade, expressed that while markets haven't entirely abandoned hopes for a deal, confidence is waning. The longer negotiations persist without notable progress, and the more complex the reported demands become, the more skepticism grows over the possibility of reaching a workable agreement quickly.

Waterer added that optimism from earlier in the month is being supplanted by a more cautious, risk-premium-driven mindset.

On Tuesday, Yemen's recognized government blamed the Iran-aligned Houthis for the killing of six individuals in missile strikes on a commercial vessel in the Bab al-Mandeb strait, which separates the Arabian Peninsula from the Horn of Africa. Yemen's coastguard reported that the deceased comprised two security force members who were on a rescue mission following the initial attack.

Later, US Central Command announced it had disabled a Panama-flagged cargo vessel after it tried to circumvent the US blockade of Iranian ports. Oil prices have been on a steady rise over the past week as conflicting signals have emerged regarding the prospects of a deal to reopen the Strait of Hormuz, which previously handled about one-fifth of global oil supplies before the war.

Doha's Foreign Ministry stated on Tuesday that discussions between Oman and Iran on the strait were nearing completion, with Qatar expressing the desire to see the waterway reopened "as soon as possible." Tehran, however, maintains that its talks with Oman are distinct from the issue of reopening the strait, asserting that the waterway will remain closed until the US agrees to certain conditions, such as war reparations and the lifting of sanctions.

US President Donald Trump claimed on Tuesday that Washington had full control over the strait, despite maritime traffic being a fraction of pre-war levels, with only 10 vessels passing through on Monday, as opposed to around 130 daily transits prior to the war. The US Energy Information Administration, in its latest market outlook released on Tuesday, projected that Middle Eastern oil production would not return to near pre-conflict levels until early 2027, with Brent prices averaging $87 a barrel in 2026.

June Goh, a senior oil market analyst at Sparta Commodities in Singapore, told Al Jazeera that OPEC crude production can only increase once there is normalcy in flows in both directions through the Strait of Hormuz. She added, "Fundamentally, oil prices remain supported at the $85-90 per barrel level barring any new headlines on renewed optimism over the diplomatic talks that have not progressed significantly."