Oil prices rose on Monday as the breakdown in US-Iran diplomacy and a sharp slowdown in tanker traffic through the Strait of Hormuz restored a geopolitical premium across crude markets.

Brent climbed as much as 1% to $89.40 a barrel, while West Texas Intermediate rose to $82.83.

Both benchmarks gained more than 5% last week after attacks on tankers and Saudi energy infrastructure revived concerns that supply disruptions could persist even as global demand weakens.

Hormuz keeps the upside risk alive

The immediate driver remains the Strait of Hormuz, where shipping activity has slowed sharply as Washington and Tehran remain deadlocked over reopening the route.

Only five commodity vessels crossed the strait on Saturday and none were recorded on Sunday, compared with 31 the previous weekend.

Iran’s Foreign Minister Abbas Araqchi has said Tehran has not decided to resume negotiations with the US, while the UAE has accused Iran of targeting another ADNOC-operated tanker.

Fresh violence in Lebanon has added to the regional risk. Israeli strikes in southern Lebanon killed at least 11 people over the weekend, the deadliest escalation since a June truce with Hezbollah.

The market response, however, remains measured rather than disorderly.

AMP chief economist Shane Oliver expects crude to stay broadly within a $70-$100 range while the Hormuz impasse persists, with constrained Middle East exports putting a floor under prices but weaker demand limiting the upside.

Demand is becoming the main brake on crude

The bullish supply story is colliding with a rapidly weakening consumption outlook.

The International Energy Agency now expects global oil demand to decline by 1.6 million barrels a day in 2026, a larger contraction than it projected last month.

It expects demand to fall 2.8 million barrels a day year on year in the third quarter as high fuel prices and disrupted supply chains hit consumption.

OPEC remains considerably more optimistic, forecasting demand growth of 580,000 barrels a day this year, although that estimate has also been cut repeatedly.

The divergence explains why Brent is struggling to break decisively above $90 despite severe disruption around Hormuz.

Traders are pricing a real supply shortage, but also increasingly questioning how much expensive crude the global economy can absorb.

Brent near $90 becomes the next test

The US Energy Information Administration expects Brent to average about $85 a barrel in the third quarter before easing towards $78 in the fourth as shipping improves and shut-in production gradually returns.

WTI remains at a discount to Brent because international supply disruptions are hitting seaborne crude more directly than the US market. The spread also highlights why the broader oil story cannot be read from WTI alone.

The volatility also matters for investors using trading platforms to gain exposure to crude futures, energy shares or oil-linked ETFs.

With Brent approaching $90, shifts in Hormuz traffic or diplomatic headlines could produce sharp moves across the sector. For now, geopolitics is setting the floor and demand is setting the ceiling.

A further collapse in Hormuz traffic could push Brent through $90 quickly, while any credible diplomatic breakthrough would expose crude to the increasingly soft consumption outlook.

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