Hormuz Rebound: Oil Prices Surge on Iran's Conditional Offer

Oil prices rebounded on Monday as investors reassessed the prospects of diplomacy over the Strait of Hormuz. The price rise came after Iran said a shipping arrangement with Oman was close, but made a broader reopening of the strait conditional on sweeping concessions from Washington.

The conditions include sanctions relief, the release of frozen Iranian assets, compensation for war damage, an end to US military threats and the removal of Washington's naval blockade. The scale of last week's decline shows how quickly the market embraced the prospect of de-escalation.

Brent crude climbed about 1% to $84.46 a barrel in early trading, while West Texas Intermediate rose to $78.79, clawing back part of losses of more than 7% last week.

JPMorgan analysts warned that global buffers are finite and that each additional month of conflict and weaker-than-expected Hormuz flows could add roughly $7-$8 a barrel to Brent's fair value. Standard Chartered sees similar fragility in the market, saying crude prices remain driven by escalation and de-escalation headlines.

Citi raised its third-quarter Brent forecast to $80 a barrel from $75 on August 7 because the US-Iran conflict and supply disruption were lasting longer than it previously expected. However, the bank kept its fourth-quarter forecast at $70 and its 2027 average at $65, suggesting prices could still fall materially once supply normalises.

JPMorgan's base case puts Brent at an average of $80 in the fourth quarter before renewed oversupply pushes the 2027 average towards $63. Goldman Sachs expects Brent to remain broadly between $80 and $90 until either a credible US-Iran agreement emerges or the conflict escalates materially.