Oil prices climb as Iranian demands cloud outlook for Strait of Hormuz

Oil prices are climbing higher as Iran’s latest demands for reopening the Strait of Hormuz dampen hopes for a return to stability in global energy markets.

Brent crude, the international benchmark, rose more than 1 percent on Monday as Tehran’s insistence that the critical waterway will not reopen without major concessions from the United States stoked market anxiety.

Brent futures for October stood at $83.77 a barrel at 2:30 GMT, up about 16 percent compared with before the start of the US and Israel’s war on Iran.

“The lack of concrete movement, together with lingering questions about the practical details of any agreement, is keeping a risk premium in the price,” Tim Waterer, chief market ‌analyst at ⁠Sydney, Australia-based KCM Trade, told Al Jazeera.

“Each day that passes without a breakthrough is making traders a little more cautious.”

Iranian Minister of Foreign Affairs Abbas Araghchi said on Sunday that while Iran and Oman were close to an agreement on the Strait of Hormuz, the waterway would not reopen until Washington met certain conditions, including easing sanctions and paying war reparations.

Shipping in the strait, a conduit for about one-fifth of global oil supplies before the war, has effectively collapsed since the conflict began in late February, prompting the largest energy disruption in recorded history.

Between eight and 15 vessels crossed the strait on August 4, August 5 and August 6, according to ship-tracking platform MarineTraffic, a fraction of the roughly 130 transits before the conflict.

Iran has repeatedly insisted on the right to control shipping in the strait despite freedom of navigation being a cornerstone of international maritime law, threatening to attack commercial vessels that attempt passage on unapproved routes.

On Saturday, the United Arab Emirates condemned Tehran over what it said was an Iranian missile attack on a vessel owned by the Abu Dhabi National Oil Company.

At least 64 violent incidents and 17 deaths involving commercial vessels have occurred in the region since the war began, according to the International Maritime Organization, most of which have been blamed on Iran.

Despite renewed volatility in energy markets, Asian stocks rose on Monday morning, with benchmark indices in Japan, South Korea and Hong Kong all making substantial gains.

Japan’s Nikkei 225 and South Korea’s Kospi were up 2.1 percent and 0.7 percent, respectively, while the Hang Seng Index in Hong Kong was 0.6 percent higher.

Waterer, the KCM Trade analyst, said there is considerable market scepticism about how quickly a workable deal to reopen the strait can be reached.

“Even if an agreement is eventually announced, history suggests these understandings can prove fragile,” Waterer said.

“That residual risk of reversal would likely limit how far oil prices could fall in the event of a diplomatic breakthrough.”