Oil Prices Climb as Fading U.S.-Iran Peace Hopes Intensify Supply Risks

Oil prices advanced on Tuesday, extending recent gains as the prospect of a lasting peace deal in the Middle East appeared to dim, stoking fears of prolonged disruptions to global energy supplies.

International benchmark Brent crude futures rose 27 cents, or 0.3%, to $91.14 a barrel by 0003 GMT, after touching their highest point since July 30. U.S. West Texas Intermediate (WTI) crude futures gained 42 cents to $85.04 a barrel, having earlier hit their highest level since July 31 at $85.37.

Geopolitical Tensions Escalate

The rally follows reports that diplomatic progress has stalled. A senior Iranian official told Reuters on Monday that Iran plans to shift to a "fully offensive" military posture after efforts to negotiate an end to the conflict with the U.S. faltered. This comes as Washington reportedly ruled out extending a temporary ceasefire agreement.

"Oil has jumped to start the week as U.S.-Iran relations look increasingly shaky," said Tim Waterer, chief market analyst at KCM. "A deal to reopen the Strait of Hormuz still does not appear to be in sight, and shipping numbers remain at a trickle."

Key Waterways Under Pressure

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Concerns are centered on critical maritime chokepoints for oil tankers. The flow of vessels through the strategic Strait of Hormuz has slowed significantly, according to market data.

• Ship-tracking data from Kpler showed that only five commodity vessels transited the strait on Saturday, with none on Sunday, a sharp drop from 31 during the previous weekend.

Adding to regional instability, Yemen’s Houthi group claimed via its military spokesperson on Telegram that it had attacked a Saudi military ship and four escort vessels in the Red Sea. This puts a spotlight on another vital passage, the Bab el-Mandeb strait.

"The dual chokehold on the Strait of Hormuz and the Bab el-Mandeb remains highly significant," Waterer noted. "These are not secondary concerns. They sit at the centre of the current supply-risk narrative."