Oil prices pushed past $108 a barrel after a conditional Iranian offer to reopen the Strait of Hormuz was met with a cold shoulder from the US, extending a standoff that has kept nearly 20% of the world’s daily crude supply off the market for three weeks.
Brent crude futures jumped to their highest level since an April 7 ceasefire, briefly touching $108 a barrel before settling at $106.13, as traders dismissed Iran's offer to reopen the critical Strait of Hormuz in exchange for the US lifting its own naval blockade.
"There are growing expectations that the oil price will remain higher for longer, as the blockade on the Strait enters its third week," said Kathleen Brooks, research director at XTB. "Goldman Sachs has increased its Q4 oil price target to $90 per barrel, from $80, as disruption to production persists for the coming months.”
The proposal from Tehran, which notably postponed any negotiations over its nuclear program, was swiftly rejected by Washington. President Trump canceled a planned trip by US envoys to Pakistan for peace talks, stating any negotiations could happen over the phone. West Texas Intermediate crude rose in tandem, gaining 2 percent to trade at $96.50 a barrel.
The impasse extends a crisis that has removed roughly 20 million barrels per day from the global market, representing a fifth of the world's typical supply. The disruption has already pushed Goldman Sachs to revise its oil price forecasts upwards and threatens to cause permanent damage to Iranian energy infrastructure, which relies on low-pressure wells that can be harmed by prolonged shutdowns.
Iran's offer, reported by ABC News citing regional officials, proposed an end to its chokehold on the Strait of Hormuz but required the US to lift its own blockade on Iranian ports and vessels. The proposal crucially sought to delay talks on Iran's nuclear ambitions, a non-starter for the Trump administration, which has repeatedly stated that preventing Iran from obtaining a nuclear weapon is a primary condition for any deal.
The market's reaction underscores the deep skepticism among traders that a resolution is imminent. "The global energy system has lost an incredible amount of flexibility," Chevron Chairman and CEO Mike Wirth told "Face the Nation," emphasizing that even if the strait were to open today, it would take significant time for the system to normalize and for inventories to be replenished. "You can't take 20% of the energy out of the system," he said.
The diplomatic fallout was immediate. President Trump announced the cancellation of a trip by his son-in-law Jared Kushner and special envoy Steve Witkoff to Islamabad for talks that were to be mediated by Pakistan. "If they want to talk, they can come to us, or they can call us," the president told Fox News.
Meanwhile, Iranian Foreign Minister Abbas Araghchi traveled to Russia for a meeting with President Vladimir Putin, blaming the US for the failure of the Pakistan talks. The move signals Tehran is seeking to shore up support from other global powers as the conflict with the US drags on, now in its eighth week. The continued closure of the strait impacts not just energy prices but global food supplies and security, as noted by Qatar's Prime Minister during a call with Araghchi.
This article is for informational purposes only and does not constitute investment advice.
