US-Iran Peace Deal Hopes Erode as Oil Prices Rise

Oil prices rose for a third consecutive day on Tuesday as hopes of a US-Iran peace deal dimmed. The Brent crude futures contract was up 36 cents, or 0.4%, at $91.23 a barrel, while the U.S. West Texas Intermediate (WTI) crude futures contract was up 56 cents, or 0.66%, at $85.06 a barrel.

The increase in oil prices comes as Iran's top negotiator, Mohammad Baqer Qalibaf, said that his country will keep the Strait of Hormuz closed until the US meets the conditions of the interim deal signed in June. This statement is seen as a setback to peace talks and the resumption of oil tanker traffic through the strategic waterway.

Economist Mohit Kumar at Jefferies noted, 'We are not at the pain points yet where either Iran or Trump would seek to make a deal.' As a result, oil prices may continue to rise in the near term. DBS Bank's head of energy research, Suvro Sarkar, predicted that the lack of a deal will have an impact on oil price expectations further out in 4Q and even in 2027.

Despite the tense situation, some oil is still being transported through the Strait of Hormuz. Saudi Aramco has resumed oil loadings from inside the waterway, while offering cargoes for loading via ship-to-ship transfers off Fujairah in the UAE. However, Iran remains in control and can fully halt the flow of oil whenever they choose.