Oil Prices Extend Rally as Strait of Hormuz Reopening Hopes Fade

ERBIL (Kurdistan24) — Oil prices extended their rally on Tuesday as fading hopes for a reopening of the Strait of Hormuz intensified concerns over global energy supplies, with crude prices rising more than one percent after gaining about five percent a day earlier.

Both major oil benchmarks have climbed roughly 10 percent over the past week as the United States and Iran remain locked in a dispute over the strategic waterway, with no clear indication of an imminent agreement to restore normal shipping.

West Texas Intermediate crude rose 1.5 percent to $83.37 a barrel, while Brent crude gained 1.3 percent to $88.85 a barrel at around 0715 GMT.

The latest price surge reflects growing uncertainty over how long restrictions around the Strait of Hormuz could persist.

The waterway is one of the world's most important energy chokepoints, carrying a substantial share of global oil and liquefied natural gas shipments from the Gulf to international markets.

Trump demands compensation from Iran

The latest setback came after US President Donald Trump said Monday that he would seek conflict-related compensation from Iran as part of any peace negotiations, citing attacks and killings over several decades that Washington says were backed or carried out by Tehran.

Trump's remarks came in response to Iran's demand that the United States provide war reparations as a precondition for resolving the crisis, adding another major obstacle to negotiations over the Strait of Hormuz and the broader conflict.

A day earlier, Trump said he was “low-keying” his approach to the confrontation, suggesting Washington could rely more heavily on economic pressure rather than launching additional military strikes.

The conflicting signals have raised doubts over the prospects for a rapid diplomatic breakthrough.

“In the absence of any positive headlines on negotiations to reopen the strait, pressure on oil prices has been upward,” Jason Wong of BNZ wrote.

Stephen Innes, global strategist at Quintex Intel, described the standoff as a confrontation in which both sides are using energy leverage without necessarily escalating militarily.

“Washington is trying to choke Iran's ability to get its crude out, while Tehran is squeezing the artery through which everybody else's crude gets through,” Innes said.

“It is quite the game of chicken.”

Hormuz standoff raises global economic risks

The Strait of Hormuz has become a central geopolitical pressure point in the US-Iran confrontation. Any prolonged disruption to shipping through the waterway could affect not only Iranian oil exports but also supplies from major Gulf producers, potentially sending energy costs sharply higher across global markets.

For oil-importing economies, sustained higher crude prices could translate into more expensive fuel, transportation and industrial inputs, complicating efforts by governments and central banks to contain inflation.

The renewed oil rally has already revived concerns about price pressures in the United States and increased speculation that the Federal Reserve could be forced to keep interest rates higher for longer.

The prospect comes despite weaker-than-expected US employment data, which had recently eased expectations of tighter monetary policy. A sustained rise in energy prices, however, could reverse some of that relief by feeding directly into consumer inflation.

Cleveland Federal Reserve President Beth Hammack told Yahoo Finance on Monday that a single 25-basis-point rate move would likely have limited economic impact, suggesting that multiple adjustments could ultimately be required depending on the inflation outlook.

Markets are now awaiting US consumer price data due Wednesday, which could provide fresh clues about the Federal Reserve's next policy decision.

Markets remain cautious

The oil rally unfolded against a mixed backdrop in global equities.

Hong Kong's Hang Seng Index fell 1 percent, while Shanghai's Composite Index declined 0.8 percent. Markets also retreated in Wellington, Mumbai, Bangkok and Jakarta, while Seoul, Sydney, Singapore, Taipei and Manila recorded gains.

In Europe, London and Frankfurt opened higher, while Paris was broadly flat. Tokyo's market was closed for a holiday.

The broader market reaction underscores the growing link between the US-Iran confrontation, energy security and monetary policy.

If the Strait of Hormuz remains disrupted for an extended period, higher oil prices could become a broader economic shock, placing renewed pressure on governments and central banks well beyond the Middle East.