Friday's hopes for Hormuz lasted one weekend. Brent crude climbed $3.34 to $107.66 a barrel in Monday trading, and WTI gained $3.19 to $95.60, after President Donald Trump said no to Tehran's plan for reopening the strait.
Both gains of more than 3% wipe out the slide that followed Iran's seven-day offer at the end of last week.
"They overplayed their hand"
The president confirmed his answer to reporters on Saturday, then explained it in a Sunday interview with Axios. "They want to make a deal, but it is not the deal that I want to make. It is what we would have maybe agreed to a year ago," he said. Iran, in his view, "overplayed their hand."
Iran had set a high bar. Before tankers could sail freely, it wanted the US naval blockade of its ports lifted, relief from the penalties on its oil sales, access to its frozen money and a halt to fighting across the region. Mike Waltz, the US ambassador to the UN, called those terms "unacceptable."
Trump did leave room for more talks. In the same interview he predicted the two sides would be talking again within days. People briefed on the plans told Axios that messages could start passing through intermediaries on Monday.
A Wall Street Journal report on Friday was less hopeful. Citing US officials, the paper said Trump has privately signaled that he sees US air strikes on Iran starting up again once the November midterms are behind him. Worry about running down US munitions is one reason he has held back so far.
Tehran holds its ground
Iran is not budging either. "We are ready to open the strait if certain things are done by the U.S.," Foreign Minister Abbas Araghchi said on Sunday, according to Bloomberg. He added that Iran would "stand firm" against any new attack.
The weekend was not quiet on the ground or at sea:
- Blasts were heard around Qeshm Island, which sits inside the strait, shortly after Trump's decision, according to Iranian outlets
- The Revolutionary Guard said it had seized a US underwater drone, a claim US officials disputed
- Saudi Arabia came under drone and missile fire from Yemen's Houthis on Saturday
Oman, which has carried messages between Washington and Tehran for years, offered to go on playing that role.
Money pressure on Tehran is also building. Treasury Secretary Scott Bessent said China has "sharply reduced" its purchases of Iranian oil.
Why oil is not higher
Brent remains below the $108.75 it reached on September 15. Two things are holding it back.
First, Saudi Arabia's East-West pipeline, which lets the kingdom ship crude from the Red Sea and skip Hormuz entirely, is reported to be running again after drone attacks forced it offline earlier this month.
Second, traders have adjusted. Kyle Rodda of Capital.com argued that the market's worst-case fears from the early days of the standoff have eased, since Tehran no longer fully controls the waterway and some oil keeps leaking out. Daniel Richards of Emirates NBD read Monday's jump as traders putting back the political risk they had priced out on Friday.
The rally spilled into other markets. Gold futures dropped $144 to $4,177 an ounce, below $4,200, as traders bet that dearer energy will keep the Federal Reserve inclined to raise rates.
What to watch next
- Whether the indirect talks Trump expects actually get going this week
- Any follow-up to the reported blasts near Qeshm Island
- Houthi attacks on Saudi export routes, which could knock the East-West line out again