Oil Prices Rebound Amid Fading Hopes for Diplomatic Breakthrough

Oil prices rebounded slightly on Tuesday after plummeting in the previous session due to concerns over supply risks in the Middle East. Brent crude futures gained $0.71, or 0.8%, to reach $84.50 a barrel, while US West Texas Intermediate (WTI) crude rose $0.61, or 0.7%, to $81 a barrel.

The increase comes after US President Donald Trump delayed fresh strikes on Iran, sparking hopes of a diplomatic breakthrough in the US-Iran conflict that has disrupted oil shipments through the Strait of Hormuz. However, these hopes were short-lived as Iran pushed back against claims of ongoing negotiations with the US.

Experts warn that the outlook for crude prices will largely depend on how long supply disruptions persist. JPMorgan estimates that every additional month of disruption could push Brent prices higher by about $7 to $8 a barrel, potentially reaching an average monthly price of $114 a barrel if the disruption lasts three months.

Goldman Sachs also warns that Brent could touch $120 a barrel if shipping disruptions through the Strait of Hormuz continue. While the bank's base case assumes tensions in the Middle East will eventually ease, it expects Brent to average $80 a barrel in the fourth quarter and $75 a barrel next year.