BY COMFORT OGBONNA
Oil prices were little changed on Monday after giving up earlier gains, as uncertainty over efforts to reopen the Strait of Hormuz offset optimism that diplomatic discussions could eventually restore unrestricted shipping through the strategically important waterway.
Brent crude futures were trading at $83.54 a barrel, down 1 cent, by 0643 GMT. U.S. West Texas Intermediate crude futures fell 15 cents, or 0.2%, to $78.03 a barrel.
Both benchmarks declined more than 7% last week as investors responded to expectations that Iran and Oman could be approaching an agreement that would allow shipping through the Strait of Hormuz to resume.
The waterway is one of the world’s most important energy corridors, with roughly one-fifth of global oil supplies passing through it before the conflict disrupted shipments. Any prolonged restriction on traffic through the strait could therefore have significant consequences for oil markets, global trade and energy prices.
Iran said Sunday that discussions with Oman were in their final stages but maintained that reopening the waterway would depend on the United States meeting additional conditions. Among Tehran’s demands is compensation for what it describes as widespread U.S. attacks against Iran.
The conflicting signals have left oil traders weighing the possibility of a diplomatic breakthrough against the risk that negotiations could stall, keeping pressure on energy supplies.
“Crude oil prices remain caught between opposing forces, as markets assess the possibility of a breakthrough over the Strait of Hormuz against Iran’s conditions for reopening the strategic waterway,” said Sugandha Sachdeva, founder of research firm SS WealthStreet.
Iranian Foreign Minister Abbas Araqchi said Sunday that Tehran and Washington are not currently engaged in direct talks and that Iran would not begin negotiations while it believes the United States is violating an interim agreement reached in June.
The uncertainty surrounding the negotiations has added to concerns about the security of energy shipments across the region. Any deterioration in diplomatic efforts could increase fears of further disruptions and push oil prices higher.
Additional supply concerns emerged over the weekend after the Iran-aligned Houthi movement said it had attacked a Saudi Aramco refinery in Jazan, Saudi Arabia. The reported incident added another layer of geopolitical risk to an already fragile regional energy market.
The development came two days after Saudi Arabia signed a joint defense agreement with Turkey and Pakistan as regional tensions continued to rise amid the conflict involving the United States, Israel and Iran.
Energy companies operating in the region have also reported disruptions and security concerns. The United Arab Emirates’ state energy company said Friday that 15 of its vessels had been attacked while transiting the Strait of Hormuz since the beginning of the conflict.
The incidents have raised concerns about the safety of commercial shipping and the potential for further interruptions to oil and fuel deliveries.
The direction of oil prices in the coming days is likely to depend heavily on developments surrounding the Strait of Hormuz and diplomatic efforts to restore normal shipping activity.
“Any major progress towards restoring unrestricted shipping could exert downward pressure on oil prices, while a breakdown in negotiations or renewed supply disruptions could quickly revive the geopolitical risk premium,” Sachdeva said.
For oil traders, the situation creates competing forces. A successful agreement that allows shipping to return to normal could ease fears of shortages and put downward pressure on crude prices. Conversely, renewed attacks, stalled negotiations or additional restrictions on shipping could tighten supplies and push prices higher.
The Strait of Hormuz will therefore remain a key focus for energy markets as investors monitor diplomatic developments and assess the potential impact on global oil supplies.
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