Oil Prices Surge Over $2 as Iran Conflict Stalls, Brent Nears $91

International oil prices rose sharply on Monday (17th), with both Brent crude and West Texas Intermediate (WTI) crude futures gaining over $2 per barrel. The rally was driven by growing investor pessimism over a diplomatic resolution to the Iran conflict, coupled with shipping disruptions in the Strait of Hormuz, which heightened market concerns about potential interruptions in global oil supply.

Brent crude futures closed up $2.35, or 2.65%, at $90.87 per barrel. WTI crude futures gained $2.10, or 2.55%, settling at $84.50 per barrel.

U.S. President Donald Trump stated that the United States is not seeking to extend its memorandum of understanding with Iran and believes Iran will not accept the agreement he demands. In a phone interview with Fox News, Trump said Iran "should raise the white flag and surrender," and warned that if Oman obstructs U.S. operations, America would launch a fierce military strike against Oman.

An Iranian senior official told Reuters that if the U.S. fails to fully implement a temporary peace agreement within weeks, Iran will further escalate tensions in the Strait of Hormuz and other regions, potentially launching attacks.

Markets are now closely monitoring whether crude oil shipments through the Strait of Hormuz will face further disruptions. Bjarne Schieldrop, analyst at SEB Research, noted that unless nighttime oil shipments through the Strait of Hormuz completely cease and/or the Bab el-Mandeb Strait is closed, oil prices are unlikely to break significantly above current levels.

Schieldrop explained that oil prices are currently trading around $90 per barrel, with markets weighing two entirely different scenarios: one involving deeper supply disruptions and shortages, and another where the situation is resolved, the Strait of Hormuz reopens, and prices fall sharply.

U.S. Energy Secretary Chris Wright, speaking to Fox News, said he believes President Trump has enough time to wait for Iran to feel the pressure from economic sanctions and oil embargoes, describing Trump’s approach as a "long-term strategy."

Wright pointed out that Iran is currently unable to export oil—a part of the U.S. economic blockade—but argued that the world does not need Iranian crude.

Phil Flynn, senior analyst at Price Futures Group, said oil prices are rising alongside increasingly heated rhetoric, and market concerns are growing over whether ships can safely pass through the Strait of Hormuz.

Both major crude benchmarks had already risen over 5% last week, primarily due to an attack on an Abu Dhabi National Oil Company (ADNOC)-operated tanker in the Strait of Hormuz and an attack on a Saudi Aramco refinery.

Iranian Foreign Minister Abbas Araqchi said over the weekend that Iran has not yet decided whether to resume talks with the U.S.; Trump, meanwhile, urged American citizens to accept rising gasoline prices during the ongoing conflict.

Iranian Foreign Ministry spokesperson Esmaeil Baghaei said negotiations with Oman regarding the management of the Strait of Hormuz are ongoing, but due to the complexity of issues, multiple actors and countries involved, and attempts by certain nations to sabotage the process, the talks require more time.

Frank Walbaum, market analyst at trading platform Naga.com, said shipping through the Strait of Hormuz remains restricted and negotiations are at a stalemate—both factors limiting further downside in oil prices. Without new market catalysts, oil prices may continue to consolidate around current levels.

Ship-tracking data also showed that shipping activity through the Strait of Hormuz slowed further over the weekend. According to Kpler data, only five bulk commodity vessels passed through the strait on Saturday, and none on Sunday—compared to 31 vessels the previous weekend—indicating a significant contraction in shipping activity.

Before the U.S. and Israel launched attacks on Iran at the end of February, the Strait of Hormuz handled about one-fifth of the world’s oil and liquefied natural gas supplies. If this critical global energy transport route remains blocked for an extended period, global energy markets could face even more severe supply shocks.

Amid tightening supply, ADNOC’s latest spot crude oil tender has drawn market attention. Trade sources said on Monday that ADNOC is offering at least 14 million barrels of spot crude to Asian refiners in its latest tender, with transactions occurring at a premium to benchmark prices—reflecting heightened demand among Asian buyers for alternative supply sources.

Meanwhile, two informed sources said Saudi Aramco is offering crude from areas outside the Strait of Hormuz to some Asian refiners. If restrictions in the Strait persist, oil-producing nations may need to rely more heavily on alternative export routes to maintain supply to Asian markets.

Domestic U.S. supply conditions are also drawing market attention. According to U.S. Department of Energy data, the U.S. Strategic Petroleum Reserve (SPR) declined by approximately 5.3 million barrels last week to 293.4 million barrels—the lowest level since December 1982. This drawdown is part of the U.S. government’s planned release of 172 million barrels from the SPR.

Wright said he would meet with U.S. refiners on Monday to discuss ways to increase fuel output and lower persistently high gasoline prices following the U.S.-Israel strikes on Iran.

Currently, U.S. refineries are operating at high utilization rates, driven by strong fuel prices boosting refining margins. However, if tensions with Iran continue to escalate and shipping through the Strait of Hormuz faces further disruptions, global crude supply risks could translate into higher gasoline and fuel costs.

Overall, markets remain caught in a tug-of-war between diplomatic progress and supply disruption risks. If U.S.-Iran talks restart and lead to the restoration of normal navigation through the Strait of Hormuz, the recently accumulated "war premium" could quickly dissipate, pushing oil prices sharply lower. Conversely, if negotiations remain deadlocked or if further disruptions occur in the Strait of Hormuz or Bab el-Mandeb Strait, crude markets could face even more severe supply shocks.