NEW YORK (Realist English). Oil prices have staged a dramatic rebound, erasing last week’s losses as hopes for a quick deal to reopen the Strait of Hormuz faded amid a war of demands between Washington and Tehran. Brent crude futures surged more than 4% on 10 August, reclaiming the $87-a-barrel mark for the first time since late July.
Prices: From Rout to Rally in a Single Week
The oil market has experienced whiplash volatility over the past seven days.
Last week, both benchmarks fell more than 7% on optimism that Iran and Oman were close to a deal that would restore shipping through the strategic waterway. That optimism has now evaporated.
On 10 August:
- Brent crude for October delivery climbed $3.57, or 4.3%, to $87.13 a barrel by 5:17 p.m. GMT.
- West Texas Intermediate (WTI) rose $3.36, or 4.3%, to $81.51.
Earlier in the day, Brent had briefly surpassed $85 for the first time since 4 August, touching $85.14. By mid-morning Moscow time, prices fluctuated around $84.69, before the rally accelerated later in the session.
The Breakdown: Why the Deal Fell Apart
The price surge was driven by a single, stark reality: despite weeks of diplomacy, there is no agreement to reopen the Strait of Hormuz – and the sides are further apart than ever.
Iran’s position: Foreign Minister Abbas Araghchi stated on 10 August that an agreement with Oman to define new shipping lanes was in its “final stages”. However, he made it clear that the strait would not reopen until Washington meets a series of conditions, including:
- Lifting all sanctions on Tehran;
- Paying war reparations for damages;
- Ending military threats against Iran.
Tehran also reiterated that it is not in direct talks with the US and will not start them while Washington is in breach of the June interim deal.
Washington’s counter-demand: President Donald Trump insisted that Iran must pay compensation for “all of the people that they have killed and gravely wounded”. With both sides demanding reparations from each other, the diplomatic window appears to have slammed shut.
The bottom line: As Westpac noted, “the Strait of Hormuz remains effectively closed”. Until a deal is finalised and implemented, the critical waterway – which carried a fifth of the world’s oil before the war – remains blocked.
New Attacks Add Fuel to the Fire
While diplomats traded barbs, the military reality on the ground only tightened supply fears.
Yemen’s Houthis, aligned with Iran, claimed another attack on Saudi Aramco’s Jazan refinery on 10 August. The 400,000-barrel-per-day facility has already postponed its restart to 30 August after two recent Houthi strikes.
ADNOC, the UAE’s state oil company, reported that 15 of its vessels have been attacked while transiting the Strait of Hormuz since the conflict began.
Ukraine continued its campaign against Russian energy infrastructure, striking the Taneco oil refinery in Tatarstan and the ZapSibNeftekhim petrochemical plant in the Tyumen region.
OPEC+ Supply Boost Becomes Irrelevant
The supply picture is further complicated by the fact that an OPEC+ production increase, approved just last week, has been rendered largely meaningless by the conflict.
The seven core OPEC+ members – Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman – agreed on 2 August to raise output by 188,000 barrels per day from September. However, as Reuters noted, the decision is “easy to dismiss … as a meaningless gesture in the face of disruptions caused by the Iran conflict”.
With the Strait of Hormuz blockaded and exports from the Gulf severely constrained, the quota increase remains largely on paper.
US Strategic Reserves at 43-Year Low
On the demand side, US supply buffers are dangerously thin.
The US Strategic Petroleum Reserve fell by about 6.1 million barrels last week to 298.7 million barrels – the lowest level since January 1983. This historic drawdown underscores the fragility of the global supply balance and leaves Washington with little room to cushion any further disruptions.
Expert Views: ‘Bullish as Long as Disruption Is Priced’
Analysts are largely bearish on the prospect of a swift resolution.
Haris Khurshid, chief investment officer at Karobaar Capital LP: “The bias stays bullish as long as the market is pricing the ‘possibility’ of disruption rather than the certainty of normalisation. Until we see actual flows normalise, I think geopolitical risk keeps a floor under crude.”
Sugandha Sachdeva, founder of SS WealthStreet: “Crude oil prices remain caught between opposing forces, as markets assess the possibility of a breakthrough over the Strait of Hormuz against Iran’s conditions for reopening the strategic waterway. Any major progress towards restoring unrestricted shipping could exert downward pressure on oil prices, while a breakdown in negotiations or renewed supply disruptions could quickly revive the geopolitical risk premium.”
Dennis Kissler, BOK Financial: “With Iran making the added demands, most traders feel near term, tighter supplies are more probable for longer.”
The oil market has entered a state of suspended animation. Last week’s hope of a quick diplomatic breakthrough has been replaced by the sobering realisation that Tehran and Washington are locked in a war of demands, with neither side willing to blink first.
Iran’s conditions – sanctions relief, reparations and an end to threats – are non-negotiable for now. Washington’s demand for Iranian compensation is equally entrenched. The Iran-Oman technical deal on shipping lanes, while “very close”, is a necessary but far from sufficient condition for reopening the strait.
As long as the waterway remains closed, supply will remain tight, prices will remain elevated, and the market will remain hostage to every new Houthi attack, Ukrainian drone strike and diplomatic twist. As Saudi Aramco CEO Amin Nasser warned last week, even if normalcy returns today, restoring production and supply to pre-war levels would take at least 18 months.
For now, the oil market is pricing disruption – and until actual flows resume, the bias remains firmly to the upside.
