Oil rises on fresh doubts over outlook for US-Iran diplomacy

OIL rose on signs that diplomatic efforts towards an agreement over the Strait of Hormuz hit stumbling blocks, casting doubt on a sustainable increase in energy flows through the world’s most important energy chokepoint. 

West Texas Intermediate rose 1.6 per cent to settle close to US$84 a barrel, while the international benchmark Brent for October delivery was near US$90 amid thin trading ahead of the contract’s expiry on Friday (Aug 28).

The more active November contract closed under US$89.

Prices gained after US President Donald Trump was said to have told mediators he is uninterested in returning to terms of a June ceasefire deal with Iran, The Wall Street Journal reported.

That dashed hopes that an Iran-Oman revenue-sharing agreement on Hormuz might soon pave the way for a broader deal with Washington, allowing more supplies to transit the waterway. 

Persian Gulf countries have embarked on a flurry of diplomacy to help facilitate an easing of tensions, bolstering optimism for a near-term agreement over the strait at the centre of the stand-off between Teheran and Washington.

Qatar’s prime minister met with Iran’s lead negotiator Mohammad Bagher Ghalibaf to discuss ways to create “appropriate conditions” for the resumption of talks with the US, according to a statement. 

Still, Teheran has repeatedly said an agreement on navigation would not equate to an immediate re-opening of the chokepoint for about a fifth of the world’s oil supplies.

Meanwhile, the US has signalled it is not interested in a deal set on Teheran’s terms, instead opting to apply pressure on the Islamic Republic’s economy through sanctions and a naval blockade of Iranian ports. 

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White House Press Secretary Karoline Leavitt told reporters earlier on Thursday that the US is not negotiating with Iran and that the blockade will remain in effect. 

“There have been many false starts to ceasefires already, so the market is hesitant to move prematurely,” said Saul Kavonic, senior energy analyst at MST Marquee. 

Oil is up more than 45 per cent in 2026 so far after the six-month conflict launched by the US and Israel in late February crimped shipping from the Persian Gulf.

Still, talks between Iran and Oman, along with US economic measures that proved less harsh than anticipated, have helped ease prices this week.

Meanwhile, some crude appears to be flowing from the Persian Gulf. About six million to eight million barrels a day are now being shipped through the waterway, according to estimates from traders involved in and monitoring cargo activity.

That increase has helped keep global crude prices in check.

Satellite images show Saudi Arabia appears to be ramping up oil loadings inside the Persian Gulf. That is a sign the world’s largest crude exporter is reorienting shipments amid threats from Yemen’s Houthi militants to its Red Sea exports.

Still, risks remain. A tanker was hit by an unknown projectile in Hormuz this week, the UK Maritime Trade Operations said. The incident is being investigated by local authorities, it said. BLOOMBERG