Oil settled higher for a second straight session as Iran's newly appointed security chief said the Strait of Hormuz stays shut regardless of any Oman-brokered deal. Fresh attacks in the Gulf, Libya and Russia widened the supply risk, while Wall Street slipped ahead of Wednesday's US inflation report.
Crude touched a one-week high on Tuesday after Brent futures rose $1.19, or 1.4%, to settle at $88.91 a barrel, while US crude finished up $1.07, or 1.3%, at $83.20. Both benchmarks extended Monday's roughly 5% jump, which had come as hopes for a swift US-Iran deal began to fade.
Iran doubles down on the Hormuz closure
The newly appointed secretary of Iran's Supreme National Security Council, Mohsen Rezaei, said the Strait of Hormuz will remain closed until the US changes its behavior and accepts Iran's conditions to end the war, even if Oman-brokered talks progress. President Donald Trump had responded on Monday with his own conditions, calling for Iran to pay compensation for those killed in the wars, attacks and protests, potentially complicating efforts to reopen the waterway.
Shipping data showed traffic through the strait has fallen to roughly six vessels, down from a recent average near eleven and a fraction of the 125 to 140 vessels a day that transited before the conflict, with around a fifth of global oil supply normally moving through it. According to Tony Sycamore, a market analyst at IG: "This is going to be almost a war of attrition now".
Attacks widen supply risk beyond the Gulf
Prices swung repeatedly through the session: both benchmarks briefly erased their gains after Qatari and Pakistani officials pointed to progress in Oman-Iran talks, then reversed higher again after the Wall Street Journal reported that US forces had fired on a Panama-flagged vessel attempting to breach the American blockade of Iranian ports.
Elsewhere, Libya's National Oil Corporation warned it could declare force majeure if drone attacks on energy assets in Zawiya continue, and Ukraine's military said it struck an oil refinery in the Russian city of Orsk. Combined with the Iran standoff, those strikes have helped push Brent up around 44% so far this year.
Wall Street retreats ahead of CPI
On Wall Street, the Dow Jones Industrial Average fell 0.34% to 53,791.85. The S&P 500 lost 0.32% to 7,728.20. The Nasdaq Composite declined 0.60% to 26,445.45.
Wednesday's US July consumer price report will not capture the most recent rise in energy costs, but it could still set expectations for the Federal Reserve's September meeting, for which money markets show a 50-50 chance of a hike.
Sources: Reuters via Investing.com, InvestingLive
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