Oil prices rose sharply on Monday as Iran rejected an extension of its understanding with the United States, raising fresh concerns that the conflict could intensify and further disrupt crude shipments through the Strait of Hormuz.
As of 6:50 p.m. WAT, Brent crude was trading at $90.66 per barrel, up $2.14, or 2.42%, while West Texas Intermediate (WTI) stood at $84.27 per barrel, up $1.87, or 2.27%.
The rally came after Iran ruled out extending a memorandum of understanding reached with Washington in June, removing a diplomatic framework that had been expected to support efforts to restore shipping through the strategic waterway.
The agreement, reached on June 17, provided a 60-day window for the two countries to negotiate a broader settlement over Iran’s nuclear programme while working toward the reopening of the Strait of Hormuz.
That deadline expired Monday without an extension.
Iranian Foreign Ministry spokesman Esmail Baghaei said Tehran had not entered negotiations to extend the agreement, arguing that Washington had breached the understanding from the beginning.
The breakdown has added to concerns that the conflict could enter a more confrontational phase. A senior Iranian official told Reuters that Tehran could move from a defensive strategy to offensive action if diplomatic efforts with the United States fail.
The official warned that Iranian forces must be prepared to respond to rising tensions around the Strait of Hormuz and the wider region.
The developments are particularly significant for the oil market because shipping through Hormuz remains severely restricted. Kpler data showed that only three vessels crossed the strait on Sunday, keeping traffic close to a standstill.
The reduction in vessel movements has heightened concerns over the ability of crude and petroleum products to move normally through the Gulf, supporting the renewed risk premium in oil prices.
Brent had already experienced significant volatility during the conflict, moving between roughly $72 and $102 a barrel last month as expectations for a US-Iran agreement repeatedly shifted.
The latest increase comes as those diplomatic expectations weaken. Instead of extending the June understanding, Iran has indicated that the framework is no longer relevant, while the United States continues to demand concessions from Tehran.
US President Donald Trump also issued a warning over efforts by Oman to mediate or help manage traffic through the Strait of Hormuz, adding another layer of uncertainty to the diplomatic process.
The immediate focus for traders is now whether the collapse of the 60-day framework will lead to a further escalation around Hormuz.
A prolonged disruption would increase pressure on global crude supply, particularly if the restricted shipping environment prevents Gulf producers from moving normal volumes to international buyers.
The oil market is therefore facing a combination of geopolitical uncertainty and physical supply risks, with the latest escalation pushing Brent back above the psychologically important $90-a-barrel threshold.