Oil prices moved higher on Monday as markets remain concerned about the impact of the ongoing closure of the Strait of Hormuz, with stalled negotiations between the United States and Iran reinforcing uncertainty around supply flows from the region.
At the same time, tentative diplomatic signals, including a new proposal aimed at reopening the strait, suggest that negotiations remain active, even if progress is uncertain.
However, any progress could be slow, which could leave the market tight for a longer period of time. Additionally,
in the event of a reopening, a return toward normal operating conditions could take several weeks, and crude volumes could climb gradually, which could limit the potential for a rapid decline in oil prices.
Looking ahead, oil markets are likely to remain highly reactive to geopolitical developments and the trajectory of negotiations, and could continue to see strong volatility as expectations change rapidly. Lingering disruptions in the Strait of Hormuz could sustain upward pressure on crude, while also increasing the risk of demand erosion if prices rise further. Conversely, any credible breakthrough could trigger a readjustment in prices as constrained supply returns to the market.
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