Oil settles up over $2 as Iran war stalemate stokes supply concerns
FILE PHOTO: A drone view shows vessels in the Strait of Hormuz, as seen from Musandam, Oman, June 15, 2026. REUTERS/Stringer/File Photo
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HOUSTON, Aug 17 : Oil prices settled up by more than $2 on Monday on global supply worries stoked by investor pessimism about diplomatic efforts to resolve the Iran war, with U.S. President Donald Trump demanding Iran’s surrender and threatening to bomb Oman.
Brent crude futures settled up $2.35, or 2.65 per cent, at $90.87 a barrel. U.S. West Texas Intermediate crude futures settled up $2.10, or 2.55 per cent, to $84.50 a barrel.
President Donald Trump said the U.S. was not seeking an extension of the memorandum of understanding with Iran. He also told reporters Iran would not make the type of deal that he thought was necessary.
Iran “should put up the white flag of surrender,” Trump told a Fox News reporter during a phone interview. “If Oman gets in the way, we’ll bomb the shit out of them,” Trump added.
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A senior Iranian official told Reuters Tehran would escalate tensions in the Strait of Hormuz and beyond, and launch an attack if the U.S. fails to implement an interim peace deal fully in a matter of weeks.
Still, oil prices are unlikely to move substantially higher unless there is a halt in the current flow of crude out of the Strait of Hormuz at night and/or a closure of the Bab el-Mandeb Strait, Bjarne Schieldrop at SEB Research said.
For now, prices are trading close to $90 as traders weigh the risk of deeper disruption and shortages against the possibility of a resolution where the Strait of Hormuz is reopened and oil prices fall sharply, Schieldrop said.
When asked during a Fox News interview whether he believes Trump has got a lot of latitude to wait out Iran while the economic sanctions and the oil embargo squeeze them, U.S. Energy Secretary Chris Wright said: “I think he does. The president is playing the long game.”
“Iran can’t export any oil right now. That’s part of our economic strangulation. But the world doesn’t need Iranian oil,” Wright said.
“As the rhetoric heats up, so do the prices,” said Phil Flynn, senior analyst for Price Futures Group, adding that uncertainty about ships crossing Hormuz is building concern in the market.
Both contracts gained more than 5 per cent last week following attacks on tankers operated by the Abu Dhabi National Oil Company in the Strait of Hormuz and on a Saudi Aramco refinery.
Over the weekend, Iranian Foreign Minister Abbas Araqchi said Iran had not decided to resume talks with the U.S., and Trump urged Americans to accept higher gasoline prices during the conflict.
Iran’s Foreign Ministry spokesperson Esmaeil Baghaei said talks with Oman over a deal to manage the Strait of Hormuz were continuing and were taking a long time due to the complexity of the subject, the involvement of multiple actors and countries seeking to undermine the process.
“Shipping through the Strait of Hormuz remains restricted, and negotiations have reached a stalemate, both of which limit the potential for further decline,” said Frank Walbaum, market analyst at trading platform Naga.com.
“In the absence of new catalysts, oil prices could continue to consolidate around current levels.”
Shipping through the Strait of Hormuz slowed over the weekend, data showed on Monday. Five commodity vessels transited the strait on Saturday, with none registered for Sunday, ship-tracking data from Kpler showed, versus 31 for the prior weekend.
Before U.S.-Israeli attacks on Iran began in late February, the strait handled about one-fifth of global oil and liquefied natural gas supplies.
Meanwhile, ADNOC sold at least 14 million barrels of spot crude to Asian refiners at premiums in its latest tender, trade sources said on Monday.
Saudi Aramco is offering crude oil outside of the Strait of Hormuz to some Asian refiners, two sources with knowledge of the matter said on Monday.
Stocks of crude oil in the U.S. Strategic Petroleum Reserve fell by about 5.3 million barrels to 293.4 million barrels last week, the lowest level since December 1982, according to data from the Department of Energy.
The drawdowns are part of a U.S. agreement to release 172 million barrels from the facility.
Wright said he would talk to U.S. refiners on Monday about ways to boost fuel production in an effort to lower gasoline prices that remain stubbornly high in the wake of the U.S.-Israeli war on Iran.
U.S. refiners are already running at high rates as strong fuel prices have lifted margins.
Source: Reuters
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