Oil Rebounds as Hormuz Risks Cloud Supply Recovery

Key Points

1. Oil rose more than 1% as renewed diplomatic uncertainty kept disruption risks around the Strait of Hormuz elevated.
2. Gulf crude exports are recovering, but September volumes remain far below levels recorded before the conflict.
3. Costly shipping workarounds and tight diesel markets extend the pressure beyond crude supply alone.

The latest

Oil prices rebounded by more than 1% on Monday after US President Donald Trump rejected an Iranian peace proposal aimed at ending the conflict and reopening the Strait of Hormuz. Brent crude futures rose $1.32, or 1.27%, to $105.64 a barrel by 00:36 GMT, while West Texas Intermediate gained 70 cents, or 0.76%, to $93.11. The proposal was transmitted through Qatari mediators. Trump rejected it on Saturday, then said Sunday that American negotiators could resume talks with Iran this week, leaving traders weighing diplomacy against renewed disruption to Gulf oil flows.

Details

• Hormuz flows: Before the conflict began in February, Hormuz carried roughly one-fifth of global oil and liquefied natural gas supplies. Kpler expects crude exports from major Middle Eastern producers to reach 12.8 million barrels per day in September, the highest since the war began but 6 million below February’s 18.8 million. Shipments through Hormuz are projected at about 7.4 million barrels per day.
• Saudi shipments: Saudi crude shipments are expected to reach about 5.4 million barrels per day in September, more than double August’s 2.45 million. Ras Tanura exports are estimated at 3.6 million barrels per day, still below February’s 6.4 million. Saudi Arabia has redirected more crude to eastern Gulf terminals after attacks damaged the East-West pipeline and disrupted shipments through Yanbu.
• Tanker traffic: Kpler data showed 19 very large crude carriers, each holding around 2 million barrels of Saudi oil, exited Hormuz last week. Some vessels may also have crossed with automatic identification systems switched off. The recovery has softened the supply shock, but greater reliance on the strait leaves flows exposed to renewed military escalation.
• Shipping workaround: Producers are increasingly using ship-to-ship transfers off Oman, moving crude from smaller shuttle tankers onto larger vessels beyond the Gulf’s most exposed areas. Transfers could reach 2.5 million barrels per day in September, against 1.4 million in August. The workaround has maintained exports, but some Gulf-to-Asia freight rates for very large crude carriers have exceeded $30 per barrel.
• Diesel pressure: Diesel prices in the United States and Europe have reached exceptionally high levels, adding inflationary pressure. ANZ analysts identified refined products as another source of tension, with potential US restrictions on diesel exports adding uncertainty. A ban or limit could reduce international availability, particularly in Europe, even as additional crude reaches global markets.

Background

Brent gained 0.4% last week, while WTI fell 7.9% as markets focused on possible additional supplies and concern over US diesel export restrictions. Tehran presented its proposal at the United Nations General Assembly, with the initiative conveyed to Washington through Qatar.

What’s next

American negotiators could resume talks with Iran this week. Traders will watch whether negotiations restart and Kpler’s September readings for Hormuz exports, Saudi terminal loadings and tanker traffic.