Oil rises as Hormuz uncertainty persists

Highlights

Brent rose 0.81%, while WTI gained 0.34%.
Hormuz remains the key supply risk for oil.
Qatar is seeking renewed diplomatic progress.
Shipping remains below normal operating levels.

Brent crude rose 71 cents, or 0.81%, to $88.55 a barrel, while West Texas Intermediate gained 28 cents, or 0.34%, to $82.51. Earlier, Brent had fallen as low as $86.22 and WTI touched $80.65 before both benchmarks recovered as uncertainty over the diplomatic process kept a geopolitical premium in the market, Reuters reports.

Diplomacy offers hope, but Hormuz risk persists

Qatar's prime minister was due to travel to Iran on Thursday in an effort to restart negotiations aimed at ending the nearly six-month conflict involving Iran, the United States, and Israel. The initiative follows a pause in fighting, though the parties remain divided over control of the Strait of Hormuz.

The waterway carried roughly one-fifth of daily global oil and liquefied natural gas supplies before the conflict began in late February. Shipping activity increased slightly Wednesday, but traffic remains constrained compared with normal conditions.

Iran and Oman are also working on details of an arrangement concerning control of the strait. Progress toward a workable shipping agreement could allow more Gulf crude to reach international markets and reduce the geopolitical premium embedded in oil prices.

Still, the negotiations remain fragile. Iran's nuclear program and control of Hormuz are unresolved, leaving the possibility that talks could stall and quickly put renewed upward pressure on crude.

Supply relief remains incomplete

The market is also assessing how long emergency measures can offset disrupted Middle East exports. Releases from strategic petroleum reserves have helped compensate for missing supply, but those flows are expected to end, increasing the importance of a sustained recovery in Gulf shipments.

That leaves oil caught between two forces. Diplomatic progress and improving tanker traffic could push prices lower by restoring supply, while another breakdown in negotiations could tighten available barrels and revive fears of prolonged disruption.

Hormuz keeps the oil market on edge

The scale of the strait's role in global energy trade means even incremental changes in shipping conditions can move prices. A durable reopening would restore a route that previously handled about 20% of global daily oil and LNG supplies, potentially removing part of the risk premium accumulated since February.

For now, traders are reluctant to price in a complete normalization. Thursday's rebound after Brent briefly approached $86 illustrates that diplomatic optimism alone is not enough while physical supply routes remain constrained and emergency reserve releases approach their end.

We have previously highlighted that Kuwait and Qatar ramp up oil shipments through Hormuz.

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