Oil Prices Surge as Hopes for US-Iran Deal Fizzle Amid Strait of Hormuz Closure

Oil prices are rising as hopes for a US-Iran deal dwindle. The Strait of Hormuz, which handled 20% of the world's oil flows before the war, is likely to remain closed until the US meets its demands or until Donald Trump's term ends in 2029, according to Iran. This has caused Brent crude prices to rise by 1%, briefly breaking past $90 a barrel, and US oil prices climbed 1% to top $83.

Tuomas Malinen, a Finnish economist, estimates that if the US didn't release more of its oil reserves, crude prices would likely be trading around $150 to $200. He believes America's oil reserves are approaching 'the danger zone' and warns that another price spike is likely if stockpiles aren't refilled soon.

HFI Research also predicts a severe energy supply shortage and extremely elevated oil prices if Iran wins control over the Strait or if the US escalates against Iran. Helima Croft, global head of commodity strategy at RBC Capital Markets, warns that the market is likely facing additional supply pressures from Ukraine's attacks on Russian energy infrastructure.

Francisco Blanch, head of commodities and derivatives at Bank of America, expects further upside for oil prices if traffic doesn't significantly increase through the Strait of Hormuz. He says roughly ten times the flow of ships would be needed to normalize prices and prevent an escalation into winter.