Global oil prices rebounded early Tuesday after suffering their biggest one-day decline in weeks, as traders returned to the market amid fresh uncertainty over the prospects of a diplomatic resolution to the conflict between the United States and Iran. The recovery came after Tehran dismissed claims by US President Donald Trump that negotiations were underway to end hostilities and reopen the Strait of Hormuz.
As at the time of writing 06:35 a.m. (WAT), Brent crude was trading at $85.10 per barrel, up 1.59%, while West Texas Intermediate (WTI) crude rose 1.16% to $81.27 per barrel, recovering part of Monday's steep losses as investors reassessed geopolitical risks across the Middle East.
Brent crude futures climbed above $85 per barrel after tumbling more than seven per cent on Monday, while WTI crude also recovered above the $81 mark. Monday's sell-off followed Trump's announcement that he had suspended another planned military strike against Iran while awaiting the outcome of what he described as ongoing peace discussions.
However, Iran's Foreign Ministry quickly rejected the claim. Foreign Ministry spokesman Esmail Baghaei said no negotiations with Washington were taking place and that no meetings had been scheduled, raising fresh doubts over the possibility of an imminent de-escalation in one of the world's most strategically important oil-producing regions.
Analysts said the market may have reacted too aggressively to expectations of diplomacy. ING noted that although crude prices had corrected sharply, geopolitical risks remained elevated because previous attempts at resolving the crisis had repeatedly collapsed. The bank added that Iran's denial of negotiations, coupled with continued warnings from Washington over possible military action, leaves significant room for renewed escalation.
The dispute over the Strait of Hormuz remains one of the biggest obstacles to any peace agreement. While Washington maintains that a memorandum reached in June requires Iran to reopen the waterway fully, Tehran insists the agreement preserves its authority over shipping arrangements. Before the conflict intensified, roughly one-fifth of global crude oil and liquefied natural gas shipments passed through the strategic corridor.
Although shipping activity has gradually improved, risks remain high. Barclays estimates that crude oil and refined product exports through the Strait of Hormuz averaged about 4.2 million barrels per day during the week ending July 31, compared with 3.2 million barrels a week earlier. Meanwhile, in the Red Sea, several Saudi supertankers have altered their routes around southern Africa, even as other cargoes continue to transit the Bab el-Mandeb Strait under heightened security.
Adding to concerns, the United Kingdom Maritime Trade Operations agency reported another maritime security incident near Oman's Al Khasab after a cargo vessel reported being struck by an unidentified projectile. The latest attack underscores the continuing threat facing commercial shipping despite the absence of widespread disruptions to oil flows.
Market analysts say the combination of security threats around both the Strait of Hormuz and the Bab el-Mandeb Strait continues to underpin oil prices. While energy exports have not been significantly curtailed, longer voyage times, higher insurance premiums and vessel diversions have increased transportation costs, preserving much of the geopolitical premium in crude markets despite Monday's sharp correction.