Oil prices climbed for a fourth consecutive session Wednesday, with Brent crude pushing toward $92 a barrel and West Texas Intermediate holding near a three-week high around $85, after the 60-day negotiating window set out in June's U.S.-Iran memorandum of understanding expired Monday without a lasting settlement over the Strait of Hormuz.
Brent settled just below $91 on Tuesday before extending its advance into Wednesday's session. President Trump said no negotiations with Tehran were currently under way, while maintaining that the strait remains open and that mines in the waterway have been cleared. Iran continues to insist the passage is shut. The contradiction between Washington's and Tehran's accounts has left shippers and insurers with little firm information to act on, even as tanker traffic through the corridor remains a trickle compared with pre-crisis levels.
Shippers Route Around the Chokepoint
Iraq and several Chinese shipping firms have begun rerouting crude away from Hormuz altogether, according to trade flow tracking, as roughly a fifth of global oil supply normally moves through the strait. Eight attacks on tankers linked to the United Arab Emirates and Saudi Arabia have been reported so far this month, keeping insurers on edge even on days when no incidents occur.
The lack of concrete movement, together with lingering questions about the practical details of any agreement, is keeping a risk premium in the price.
Tim Waterer, chief market analyst, KCM Trade
The persistence of elevated prices is beginning to reshape expectations. Energy traders had priced in earlier hopes of a swift diplomatic resolution; the expired memorandum, which was meant to give both sides 60 days to negotiate a longer-term peace agreement, has instead left the market pricing a standoff that could run considerably longer.
Higher crude prices carry consequences well beyond the energy sector. Sustained gains raise input costs for transport, manufacturing and logistics, complicating the path for the Federal Reserve as it weighs whether elevated inflation readings will persist into the autumn. Energy shares have been among the market's few bright spots this week even as broader indexes have fallen on the combination of higher oil and rising bond yields.
Traders are now watching for weekly U.S. inventory data and any sign of renewed diplomatic contact between Washington and Tehran. Absent a breakthrough, analysts expect the risk premium embedded in prices to persist, with Brent likely to test the $92 to $95 range if the standoff extends into a second week past the memorandum's expiration.
