Oil rises as Hormuz talks and supply risks remain in focus

Oil prices gained on Tuesday as investors weighed signs of progress in talks between Oman and Iran over shipping through the Strait of Hormuz against continued disruptions to global energy supplies from the Middle East and Russia.

Brent crude futures rose 1.05%, to $88.64 a barrel, while US West Texas Intermediate crude gained 1.25%, to $83.16.

Both benchmarks had settled at their highest levels since July 31 in the previous session after uncertainty surrounding the reopening of the Strait of Hormuz lifted prices.

The market has been closely watching diplomatic efforts after Qatar's foreign ministry said discussions between Oman and Iran over shipping routes through the strategic waterway had reached an advanced stage.

The comments followed an exchange of demands between the United States and Iran that complicated efforts to reopen the strait.

Before the conflict began on February 28, roughly 20% of global oil supplies passed through the Strait of Hormuz.

Shipping disruptions and geopolitical risks continue

Despite signs of diplomatic progress, shipping activity through the Strait of Hormuz remains significantly below pre-conflict levels.

Shipping data showed only six vessels transited the strait on Monday, compared with a 10-day average of around 11 vessels, underscoring the continued disruption to one of the world's most important energy corridors.

Fawad Razaqzada, analyst at City Index and FOREX.com, said in a Reuters report that the market remained cautious despite diplomatic headlines.

"Any signs of de-escalation or any signs of a deal are good news for risk assets and bad for oil, obviously. But it's all talk at the moment. It's all headlines. There's no meaningful progress."

Elsewhere in the region, tensions remained elevated.

Three crew members were reported killed in a suspected Houthi attack on an Egyptian-owned vessel in the Bab el-Mandeb Strait, while a container ship was struck by a missile off Pakistan in what sources described as a suspected US attack.

Meanwhile, Abu Dhabi National Oil Company continued offering spot crude cargoes through tenders as it seeks alternative routes for exports outside the Strait of Hormuz.

Supply concerns also extended beyond the Middle East.

Libya warned it could declare force majeure if drone attacks on energy infrastructure continued in the strategic city of Zawiya, while Ukraine said it had struck an oil refinery in Russia's industrial city of Orsk.

Inflation concerns grow as energy prices stay elevated

The combination of disruptions in the Middle East and attacks on Russian energy infrastructure has supported oil prices throughout the year, with Brent crude now up about 44% in 2026.

Analysts warned that sustained strength in oil prices could complicate inflation and monetary policy.

Warren Patterson, ING's head of commodity strategy, said geopolitical uncertainty continued to underpin the market.

“Oil prices remain supported by uncertainty surrounding the Strait of Hormuz. While Trump said Washington is ‘semi-negotiating’ with Iran, suggesting a focus on economic pressure rather than military escalation, significant hurdles remain before any broader agreement is reached.”

Meanwhile, US Strategic Petroleum Reserve inventories have fallen below 300 million barrels, their lowest level since 1983, reducing the country's ability to respond to additional supply disruptions.

US gasoline inventories are also at their lowest levels in more than a decade, keeping fuel prices elevated.