Crude oil rallied sharply again Tuesday, with both benchmarks hitting their highest levels since July 31, as traders concluded that a resolution to the six-month U.S.-Iran conflict is further off than expected just days ago, and that the reopening of the Strait of Hormuz looks further off than expected just days ago.
Tuesday’s 2%-plus gains build on a dramatic Monday session, when both Brent and WTI jumped more than 5% after President Trump escalated a war of words with Tehran over reparations.
The back-and-forth began after Iranian officials said they were nearing a shipping-lane agreement with Oman to govern passage through the Strait of Hormuz but insisted that any broader reopening of the strait to U.S.-linked traffic still hinged on Washington paying compensation for war damage, lifting sanctions, and ending military threats against Iran.
Trump responded on Truth Social that Iranian officials were seeking compensation for damage from the five-month conflict and called it “an interesting idea” before saying he would likewise demand compensation from Iran.
He went further at the White House on Monday, telling reporters his administration would seek payment for what he described as “50 years” of damages caused by Iran.
Later Monday, Trump added that the U.S. Navy retains effective control of the strait and has cleared it of Iranian mines, a claim aimed at undercutting Tehran’s negotiating leverage even as tanker traffic through the waterway remains sharply diminished.
The conflict at the root of the oil-market turmoil began with U.S.-Israeli strikes on Iran, which by some accounts have effectively blocked the strait since the attacks on February 28, sending crude prices and inflation higher ever since.
An interim peace framework reached in June collapsed over disputes about who would control the strait going forward, and talks have lurched between optimism and stalemate ever since.
Iran’s foreign minister has said Tehran is not currently engaged in direct talks with Washington on ending the war, even as U.S. officials have at times suggested a deal was close.
Analysts remain skeptical that the compensation dispute reflects genuine common ground. One former U.S. National Security Council official described the exchange as posturing rather than serious negotiation, noting that both governments have strong incentives to strike a deal with Iran because its economy cannot sustain indefinite export losses, and with Trump because he faces pressure to avoid high gasoline prices heading into November’s midterm elections.
The price action reflects a genuine, measurable disruption to global energy flows rather than pure speculation. Shipping data cited by Reuters showed just six vessels transited the Strait of Hormuz on Monday, versus a 10-day average of roughly 11, already a fraction of pre-war volumes.
Barclays analysts calculated that net crude and refined-product exports through the strait averaged 3 million barrels per day in the week ending August 7, down from 4.4 million bpd the week before. Before the war began, roughly one-fifth of the world’s oil and LNG supply moved through the waterway.
U.S. Central Command has been enforcing its own blockade posture around the strait; as of August 9, it reported redirecting 55 commercial vessels, disabling two, and boarding two more to ensure compliance with U.S. restrictions, underscoring that reopening Hormuz is not solely a matter of Iranian consent but also of Washington’s own military footprint there.
The disruption isn’t confined to Hormuz. Saudi Aramco’s decision to push back the restart of its 400,000-bpd Jazan refinery to August 30, following claimed Houthi attacks over the weekend, points to a broader pattern of Red Sea and Gulf shipping risk.
As KCM Trade’s Tim Waterer put it, the “chokehold risk” around both Hormuz and the Bab el-Mandeb strait keeps insurance costs elevated and forces tankers onto longer, costlier routes even when incidents are only intermittent.
Meanwhile, Gulf producers are adapting in real time: ADNOC’s eighth spot crude tender since June reflects the UAE’s effort to move oil that would otherwise transit the strait, a workaround that speaks to how entrenched traders now expect the disruption to be.
Iran and Oman are reportedly closing in on a separate arrangement to manage shipping lanes between them, a deal that, ironically, could hand Tehran more practical control over Hormuz than it held before the war.
But that bilateral arrangement is distinct from, and doesn’t resolve, the broader standoff over reparations, sanctions relief, and a formal end to hostilities between Washington and Tehran.
Until that larger deal materializes, Saxo Bank’s Ole Hansen’s assessment looks likely to hold: there is no clear path to a full reopening of the strait, and markets should expect continued, meaningful supply disruption in the near term.
WHAT YOU SHOULD KNOW
Oil prices are surging because the U.S.-Iran conflict shows no real sign of ending and the Strait of Hormuz, which normally carries a fifth of the world’s oil, remains largely shut.
Trump’s new demand for compensation from Iran, mirroring Iran’s own demand for war reparations, has turned what looked like progress into a fresh standoff, with neither side likely to back down easily.
Until that political deadlock breaks, expect oil prices to stay elevated and volatile. This isn’t a temporary spike; it’s the market pricing in a war with no clear end date.
