Oil surges to $85 as Hormuz uncertainty persists amid regional attacks

Oil prices climbed on Monday as traders grappled with a familiar tension: the Strait of Hormuz remained closed, but a deal to reopen it seemed tantalizingly close. Brent crude futures rose $1.12 per barrel to $84.70, a gain of 1.5 percent. West Texas Intermediate crude added 94 cents to reach $79 a barrel. The moves came as Iran signaled that negotiations with Oman over new shipping lanes were in their final stages—a development that had actually sent prices down more than 7 percent the previous week. But the optimism proved fragile. Iran's Foreign Minister Abbas Araqchi made clear on Sunday that Tehran would not reopen the waterway until Washington met additional demands, including compensation for what Iran characterized as widespread American attacks. He also stated flatly that Iran and the United States were not in talks, and that Iran would not negotiate so long as the US continued to violate an interim agreement signed in June.

The Strait of Hormuz had been a chokepoint for global energy markets since the conflict began. Before the disruption, roughly one-fifth of the world's oil flowed through those waters. The closure had created genuine supply anxiety, and that anxiety spiked again over the weekend when attacks resumed. The Houthis, an Iran-aligned militia, claimed responsibility for striking Saudi Aramco's Jazan refinery on Sunday. The timing was pointed: Saudi Arabia had just signed a defense pact with Turkey and Pakistan, a move explicitly framed as a response to the regional instability stemming from the US-Israeli war on Iran. The UAE's national oil company, ADNOC, reported separately that 15 of its vessels had come under attack while transiting the Strait since the conflict began.

Wall Street's commodity analysts were now running scenarios, and the numbers they produced suggested the market had real reason to worry. JPMorgan estimated that each additional month the Strait remained closed could add between $7 and $8 to the price of a barrel of Brent crude. If the disruption stretched to three months, the bank projected average monthly Brent prices would climb to around $114 a barrel. Goldman Sachs went further, warning that Brent could spike to $120 a barrel if shipping disruptions persisted through the Strait and the Red Sea, the world's most critical oil transit route. Yet Goldman's base case—the scenario the bank considered most likely—assumed that Middle Eastern tensions would eventually ease. In that world, Brent would average $80 a barrel in the fourth quarter and fall to $75 in 2027.

The divergence between worst-case and base-case scenarios reflected genuine uncertainty about how long the disruption would last. Goldman cautioned that upside risks remained substantial, given the possibility of prolonged closures in both the Strait of Hormuz and the Red Sea. But other analysts pointed to structural forces that would eventually push prices lower. Anindya Banerjee, head of commodity research at Kotak Securities, noted that supply outside the conflict zone was expanding. OPEC+ had raised production targets. The UAE was operating at record output levels. Non-OPEC producers were responding to higher prices by bringing more barrels to market. The direction of the outlook remained unchanged, Banerjee said—oil would cool as the market moved into 2027. The path and timeline had shifted, but the destination had not.