Pakistan signals US-Iran deal near as oil jumps 10% on Hormuz

Pakistan's defense minister said Tuesday the US and Iran are close to an arrangement over the Strait of Hormuz, even as Brent crude surged 10% in a week on fading hopes for reopening.

"Things are shaping up again in favor of a peace arrangement or a deal," Khawaja Asif, Pakistan's defense minister, told Bloomberg in Islamabad. "The signals in the last two or three days are that we are close to some sort of an arrangement."

Brent settled at $83.55 a barrel Friday after dipping below $80 earlier in the week, then jumped about 5% Monday and more than 2% Tuesday to edge toward $90. The strait, which carried about 20 million barrels of oil daily — roughly one-fifth of global production — before the war began Feb. 28, has seen transits fall to just eight vessels Friday, down from 130-140 pre-war crossings per day, according to Kpler data.

A deal could unlock the waterway and ease energy costs, but Iran's demands — including US compensation, lifting the naval blockade, and a permanent end to the war — remain far from what Washington has offered. Trump has countered with his own compensation demands, and both sides appear locked in a standoff that keeps oil prices elevated and inflation risks alive.

Iran's national security chief Mohammad Bagher Zolghadr issued a list of conditions Saturday for reopening the strait, including lifting the US naval blockade, withdrawing military forces, permanently ending the war, compensating Iran for conflict damages, and releasing frozen Iranian assets. "Until America corrects its behavior, the Strait of Hormuz will not be reopened," his statement read.

Iran's Foreign Minister Abbas Araghchi said the country is "very close" to a deal with Oman on managing the strait, but cautioned that reopening was "subject to other conditions," including US compensation for what he called a violation of the June memorandum of understanding. Oman's Foreign Ministry described the talks as "positive and constructive" but warned that continued Iranian attacks on vessels threaten progress.

The US has its own leverage. President Trump told reporters Monday the US Navy controls the strait, calling the blockade a "steel wall," and demanded compensation from Iran for decades of attacks on American targets. Vice President JD Vance said the administration expects any deal to restore oil flows to pre-war levels, while the US military has disabled three non-compliant vessels, boarded two, and redirected 55 commercial ships attempting to run the blockade, according to CENTCOM.

Regional escalation widens the risk

The standoff has broader regional implications. Saudi Arabia signed a mutual defense pact with Pakistan and Turkey on Friday, committing all three to collective defense. Iran dismissed the agreement, with parliament member Mahmoud Nabavian writing on X that "clinging to America's lackeys will not bring them security." Meanwhile, Houthi attacks on shipping in the Bab el-Mandeb strait killed at least six people Tuesday, and Yemen faces its greatest risk of renewed conflict since the 2022 truce, according to UN Special Envoy Hans Grundberg.

The last time the strait faced a sustained closure threat was during the Iran-Iraq War's "Tanker War" in the 1980s, when oil prices spiked sharply and the US deployed naval escorts. Today's situation differs in scale — the strait now carries about 20% of global oil and LNG trade — but the market dynamics are similar, with shipping groups warning that proposed tolls or "service fees" would further raise trade costs.

For markets, the path forward hinges on whether Pakistan's optimism translates into concrete progress. If a deal emerges, oil could quickly retrace recent gains. If talks collapse, Brent above $90 becomes the base case, feeding inflation concerns and raising the odds of Federal Reserve rate hikes — a scenario that would pressure equities and widen credit spreads across emerging markets.

This article is for informational purposes only and does not constitute investment advice.