Trump's Demands Slam Door on Strait of Hormuz Deal, Crude Oil Prices Soar

Crude oil prices continued their upward trend on Monday and Tuesday, August 10-11, as hopes of a deal to reopen the Strait of Hormuz faded. US President Donald Trump's demands for compensation from Iran for past conflicts have cast a shadow over any potential agreement.

The price surge was driven by the Strait's reduced traffic, with only five vessels transiting it as of Tuesday, compared to 14 daily average after the signing of the MoU in June. This has led to a significant reduction in global inventories and flows are nowhere near normal levels, said Amrita Sen, founder and director of market intelligence at Energy Aspects.

According to Bart Melek, global head of commodity strategy at TD Securities, this could lead to aggressive covering of shorts, which may drive Brent prices up by $10-15 above current levels. The price has already moved towards the $90 a barrel mark, with Brent Crude and West Texas Intermediate (WTI) surging 5% each overnight.

Trump's demands include compensation for all people killed in past conflicts, which is part of the $300 billion fund for rehabilitation and economic development of Iran. The US President has instructed his representatives to put these demands firmly into any future negotiations.