Trump's Hormuz claim pushes Brent to $89 as Iran talks stall

Trump claimed "total control" over the Strait of Hormuz, declaring "We own it," as US-Iran negotiations remain deadlocked and Brent crude holds near $89 a barrel ahead of Sunday's interim deal deadline.

The International Energy Agency's July production report shows OPEC+ members implementing voluntary output cuts produced 28.06 million barrels per day against a 34.08 million bpd target — a 6.02 million bpd shortfall that leaves limited spare capacity to offset any supply disruption at the strait.

Brent crude traded around $89 a barrel Wednesday, with West Texas Intermediate near $83, after an Iran-aligned Houthi attack killed four crew members and two Yemeni rescuers in the Bab el-Mandeb Strait. The US military separately fired on and disabled a container ship heading toward an Iranian port in the Gulf of Oman. Saudi Arabia boosted output by 900,000 bpd in July, Iraq by 470,000 bpd, and Kuwait by 290,000 bpd, yet total OPEC+ production of 34.53 million bpd still trails the group's combined target.

The Strait of Hormuz handles roughly 20 percent of global oil supply, and the 60-day memorandum of understanding signed in June — with Pakistan as guarantor — expires Sunday. Kotak Securities projects Brent could climb to $95-$97 a barrel if the standoff persists. Higher energy costs would ripple through freight, aviation, and manufacturing supply chains globally, while Pakistan's Interior Minister Mohsin Naqvi visited Tehran this week in a renewed push to revive mediation.

Supply cushion thins as OPEC+ falls short

The IEA data shows how thin the global supply cushion has become. OPEC+ nations participating in the output-cut deal increased production by 1.15 million bpd in July but still fell 6.02 million bpd short of their combined 34.08 million bpd target. Saudi Arabia's 900,000 bpd increase was the largest single boost, followed by Iraq's 470,000 bpd and Kuwait's 290,000 bpd. Kazakhstan cut output by 330,000 bpd in June, while Russia trimmed 100,000 bpd in July. Algeria reduced output by 10,000 bpd and Oman by 20,000 bpd, further tightening the available buffer.

The last time the strait faced sustained disruption was during the 2019 tanker attacks, when Brent spiked above $70 before retreating as supply proved resilient. The current setup differs: OPEC+ spare capacity is thinner, and the IEA has already cut its 2026 supply forecast as Hormuz reopening remains elusive. The agency's July report also flagged that the production shortfall against planned quotas has widened, meaning the group's ability to respond to a sudden supply shock is more constrained than in prior cycles.

Mediation efforts intensify as deadline approaches

Pakistan is working to bring the US and Iran back to the negotiating table before Sunday's deadline. Interior Minister Mohsin Naqvi met with Iranian President Masoud Pezeshkian and Foreign Minister Abbas Araghchi in Tehran this week, following up on the stalled interim agreement that Pakistan signed as guarantor. The deal derailed last month as tensions escalated and both sides resumed military strikes.

Trump said the situation with Iran is "going fine" and that US forces are in "total control" of the strait, but Iran's parliamentary panel passed a strategic framework for Hormuz's security on Monday, a move that suggests Tehran is preparing for a prolonged standoff. Iran says no progress has been made on reviving the June interim peace deal, and the 60-day memorandum's expiration Sunday could mark a formal end to the truce.

For global markets, the stakes are clear. The strait carries roughly 20 percent of the world's oil and a significant share of LNG. Any sustained closure would push Brent well above $90, feeding inflation expectations and pressuring equities across transport, chemicals, and manufacturing sectors. The Panama Canal has also seen record transit fees as shipping reroutes, compounding cost pressures. If the deal collapses Sunday, the IEA's already-reduced 2026 supply forecast would face further downward revision, and the risk premium embedded in crude prices would expand well beyond current levels. Shipping insurers have already begun adjusting war-risk premiums for vessels transiting the region, adding another layer of cost to global trade.

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