Oil prices climbed further on Tuesday as hopes of a deal to reopen the Strait of Hormuz faded, raising fresh concerns about global energy supplies and inflation.
Brent crude rose more than one per cent to around $89 a barrel, while US West Texas Intermediate crude traded above $83, extending a rally that has lifted oil prices sharply over the past week.
The latest increase followed a fresh escalation between Washington and Tehran after US President Donald Trump demanded compensation from Iran for deaths and damage he blamed on the country over several decades.
Trump’s demand came after Iran called for compensation, sanctions relief and an end to US military threats as conditions for resolving the crisis and restoring normal shipping through the strategic waterway.
The exchange has complicated efforts to reach a quick agreement, despite recent signs of progress in negotiations involving Iran and Oman.
Iranian officials have said discussions with Oman over a proposed shipping arrangement were progressing and that a map for a new route had been agreed. Tehran, however, has maintained that the agreement would not by itself be enough to reopen the strait.
Washington has also expressed optimism that an agreement could be reached, but major differences remain over sanctions, compensation, military pressure and control of vessels entering the Gulf.
The Strait of Hormuz remains at the centre of the dispute because of its importance to global energy markets. Shipping traffic through the waterway has dropped dramatically, with only six vessels recorded passing through on Monday, far below the pre-war average of about 130 to 140 vessels a day.
The disruption has tightened oil supplies and pushed up shipping costs, adding to the pressure on crude prices.
Oil exports through the strait averaged about three million barrels per day in the week ending August 7, down from 4.4 million barrels per day the previous week.
The renewed rally has also revived fears that higher energy costs could feed into inflation and complicate interest-rate decisions in major economies.
In the United States, traders are awaiting Wednesday’s consumer-price data for indications of whether inflation is accelerating. The figures could influence expectations about the Federal Reserve’s next policy move.
Higher oil prices can raise the cost of petrol, diesel, transportation and industrial production, creating wider price pressures for consumers and businesses.
The latest developments mark a reversal from the optimism seen earlier this month when Trump signalled a willingness to pursue negotiations with Tehran.
Oil prices fell sharply on August 3 after Trump postponed planned military action and suggested that diplomatic efforts could produce a breakthrough. That optimism has since weakened as Washington and Tehran have hardened their respective positions.
Trump has also said he is allowing economic pressure on Iran to build rather than immediately escalating military action.
The uncertainty is being closely watched by energy traders because a sustained disruption around Hormuz could keep crude prices elevated for longer.
For oil-producing countries, higher prices could provide additional revenue, but prolonged instability could also disrupt production, shipping and investment across the region.
For oil-importing countries, the consequences could be more immediate, particularly through higher fuel, transport and food costs.
With diplomatic positions still far apart and shipping through Hormuz severely restricted, traders are increasingly looking beyond political statements for evidence of a genuine reopening.
A sustained return of commercial vessels, lower shipping risks and restored oil flows would provide stronger signals that the crisis is easing.
Until then, the Strait of Hormuz remains a major source of uncertainty for global energy markets.
