LONDON: Oil prices retreated on Monday after surging to more than one-month highs, as hopes of renewed negotiations between the United States and Iran eased concerns over potential supply disruptions despite continued hostilities and reduced shipping through the Strait of Hormuz.
Brent crude futures reversed earlier gains to trade around $88 a barrel, after briefly climbing to an intraday high of $91.42, the highest level since June 11.
US West Texas Intermediate (WTI) crude also fell back to around $82 a barrel after earlier touching its strongest level since June 12.
The sharp reversal came after Iranian foreign ministry spokesperson Esmail Baghaei indicated that diplomatic contacts with Washington could resume despite the collapse of last month’s interim ceasefire arrangement.
Diplomatic signals weigh on prices
A senior Iranian official, cited by Reuters, said that mediators had conveyed a proposal calling for a 10-day ceasefire aimed at de-escalating the conflict and reviving an interim agreement reached last month between Tehran and Washington.
Meanwhile, Iranian Foreign Ministry spokesman Esmaeil Baghaei said at a press conference in Tehran that intermediaries had passed new proposals to Tehran in recent days and that negotiations with the United States could proceed if they served Iran’s national interests, AFP reported.
The diplomatic signals prompted investors to trim earlier bets on a prolonged disruption to Middle East oil supplies.
“Comments from Iran’s foreign ministry spokesperson saying that the country has received new proposals from mediators have seen oil prices giving up all earlier gains, though flows through the Strait of Hormuz remain depressed,” UBS analyst Giovanni Staunovo said.
Crispus Nyaga, a research analyst at Empire FX, also said renewed efforts to restore dialogue between Washington and Tehran had weighed on prices.
Strait of Hormuz tensions
Despite the market pullback, concerns over energy supplies remained elevated as shipping through the Strait of Hormuz continued to slow amid escalating military tensions.
The United States carried out a ninth consecutive night of strikes against Iran over the weekend, saying its operations would continue targeting Iranian military capabilities used to attack commercial shipping and civilian vessels transiting the strategic waterway.
Iran, meanwhile, said on Saturday it had formally withdrawn from the ceasefire agreement. US President Donald Trump had earlier declared the truce effectively over.
On Sunday, Iran launched strikes against sites in Jordan, Kuwait and Bahrain.
Tanker traffic slows
The conflict has sharply reduced tanker movements through the Strait of Hormuz, one of the world’s most important energy corridors.
The Islamic Revolutionary Guard Corps (IRGC) claimed on Monday that two oil tankers had been immobilised after explosions while attempting to use what it described as an unsafe southern route through the strait. The IRGC alleged the vessels had been encouraged by the US military to use that route.
Separately, the United Kingdom Maritime Trade Operations (UKMTO) reported that a vessel was on fire northwest of Oman’s Kumzar early on Monday.
LSEG shipping data showed that only four vessels transited the Strait of Hormuz on Sunday, down from eight the previous day. The data also showed that at least three oil products tankers and one very large crude carrier had entered the strait since Friday to load crude.
