Oil Nears $90 as Fading U.S.-Iran Deal Hopes Renew Hormuz Supply Fears

Key Takeaways

• Brent futures rose 0.81% to $89.63 a barrel in early Wednesday trading, while WTI gained 0.85% to $83.91, extending a rally driven by renewed Middle East supply concerns.
• Strait of Hormuz traffic fell to six vessels on Monday, far below the pre-conflict norm of 125 to 140 daily transits, as the United States and Iran remained divided over conditions for ending the war.
• A reported 9.1 million-barrel increase in U.S. crude stocks could limit the advance if confirmed, but the EIA still expects some Middle East supply disruption to persist through the end of 2027.

Oil Prices Extend Their Advance

Brent futures gained 72 cents, or 0.81%, to $89.63 a barrel by 0053 GMT. U.S. West Texas Intermediate crude increased 71 cents, or 0.85%, to $83.91, according to a Reuters market update carried by Euronext.

Both contracts had settled more than $1 higher on Tuesday, posting their strongest closes since July 31. That followed gains of about 5% on Monday as the probability of a near-term diplomatic breakthrough appeared to decline.

The price action indicates that traders are again assigning greater weight to supply risk than to the possibility of an imminent reopening of regional shipping routes. However, the relatively measured move on Wednesday—after Monday's much larger jump—also suggests the market is assessing how much disruption is already reflected in prices.

Hormuz Traffic Collapse Sustains the Risk Premium

The Strait of Hormuz remains the central physical-market concern. Shipping data showed only six vessels passed through the waterway on Monday, down from a 10-day average of about 11. Before the conflict began in February, daily traffic was typically between 125 and 140 vessels.

The comparison illustrates the severity of the disruption, but vessel counts should be interpreted carefully. Tankers vary considerably in size and cargo, and some transits involve non-energy shipments or empty vessels. The number of ships therefore provides a timely measure of maritime activity rather than a direct calculation of lost oil supply.

Volume estimates nonetheless point to a substantial contraction. The U.S. Energy Information Administration estimated that crude oil and petroleum liquids moving through Hormuz averaged 4.9 million barrels per day in the second quarter of 2026, down from 21.6 million barrels per day in the fourth quarter of 2025, before the conflict.

That decline matters because the strait normally handles a significant share of internationally traded energy. Limited pipeline capacity means Gulf producers cannot quickly redirect all displaced barrels, while longer alternative routes add freight, insurance and financing costs.

Diplomatic Friction and Maritime Incidents Add Uncertainty

The latest price increase followed signs that the conditions set by Washington and Tehran remain difficult to reconcile. Mohsen Rezaei, secretary of Iran's Supreme National Security Council, said the strait would remain closed unless the United States accepted Iran's terms for ending the war. Those conditions reportedly include the release of frozen Iranian assets and an end to other regional conflicts.

U.S. President Donald Trump, meanwhile, has demanded compensation from Iran for people killed in wars, attacks and protests. The exchange has weakened expectations that an earlier memorandum of understanding could quickly translate into restored commercial passage.

The diplomatic setback coincided with separate reports of shipping attacks. The United States and Yemen's Iran-aligned Houthi movement gave accounts of incidents affecting vessels near Hormuz and Bab el-Mandeb. Because details originated from parties to the conflict, the reports require attribution and may remain subject to revision as more information emerges.

For energy markets, the location of the incidents is significant. Bab el-Mandeb connects the Red Sea with the Gulf of Aden and has served as part of an alternative route for some cargoes redirected away from Hormuz. Simultaneous insecurity around both chokepoints could narrow logistical options even when physical production remains available.

U.S. Inventory Build Offers a Bearish Counterweight

Domestic inventory data provided the main restraint on crude's advance. Market sources citing the American Petroleum Institute said U.S. crude stocks increased by about 9.1 million barrels in the week ended August 7. Gasoline inventories reportedly declined by 1.5 million barrels, while distillate stocks fell by 596,000 barrels.

The crude build was substantially more bearish than market expectations for a draw. If confirmed by the EIA's official weekly report, the increase could reduce immediate concern about U.S. supply availability and cap part of the geopolitical rally.

The API estimate is preliminary, however, and can diverge from government data because of differences in reporting coverage and methodology. A single weekly increase may also reflect changes in imports, exports or refinery operations rather than a durable shift in underlying demand. Traders will therefore examine the composition of the official report as closely as the headline stock change.

What the Market Is Watching Next

Near-term price direction is likely to be determined by four observable signals: progress in U.S.-Iran diplomacy, verified traffic and cargo volumes through Hormuz, the frequency and severity of maritime attacks, and official U.S. inventory data.

Risks remain two-sided. A credible agreement with a clear timetable for reopening the strait could remove part of the geopolitical premium quickly, particularly if official inventory figures show comfortable supply. Conversely, prolonged restrictions or attacks that further impair Hormuz and Bab el-Mandeb could sustain high freight and insurance costs, delay the rebuilding of inventories and keep crude volatility elevated.

The current rally therefore reflects more than the barrels already removed from the market. It also incorporates uncertainty over how quickly normal trade can resume—and how exposed alternative supply routes remain while diplomacy is unsettled.