Oil prices rose sharply on Sunday after the U.S. and Iran exchanged fresh strikes over the weekend, with markets once again pricing in heightened military tensions as the two sides struggled to close a deal to reopen the Strait of Hormuz.
Brent crude jumped 3.1% to $93.95 a barrel, rebounding from its lowest close since mid-April recorded last week. WTI futures climbed 3.5% to $90.40 a barrel. The gains came after oil had retreated sharply in recent sessions on hopes for a diplomatic resolution.
The two sides are discussing a memorandum of understanding that would clear blockages in the Strait of Hormuz, the critical oil-transit chokepoint, and establish an extendable 60-day framework to address disputes over Iran’s nuclear program and sanctions relief, according to the Journal. But after seven weeks of negotiations, no agreement has materialized.
President Trump said in a Fox News interview on Saturday that the U.S. was “close to a very good deal,” while simultaneously suggesting a possible return to fighting as an alternative. The mixed signals underscore the uncertainty that has driven oil price swings since the conflict escalated earlier this year.
Ipek Ozkardeskaya, a senior analyst at Swissquote, warned that markets have not fully accounted for the risk of a prolonged Hormuz closure. “Global oil reserves are falling fast, and markets are not pricing an extended closure of the Strait of Hormuz, meaning that upside risks to oil prices loom,” Ozkardeskaya said.
Amarpreet Singh, a Barclays commodities research analyst, described the market’s position as caught between hope and reality. “Market participants seem eager to price in a resolution to the Strait of Hormuz situation but a potential deal to get to that outcome remains elusive after seven weeks of negotiations,” Singh said in a note.
Oil has been volatile since the conflict began disrupting flows through the strait earlier this year. Prices topped $100 a barrel in early March before a series of ceasefire announcements and reopening hopes pulled them down. Each diplomatic setback — including Iran’s reversal of a Hormuz reopening in mid-April — has sent prices climbing again. The pattern of sharp drops on negotiation progress followed by rebounds when talks stall has repeated through the spring.