Oil prices jumped more than 3 percent on Monday after the United States rejected Iran’s latest proposal aimed at resolving the conflict and reopening the Strait of Hormuz, reviving concerns over crude supplies from the Middle East.
Brent crude oil, the international benchmark for Nigerian crude oil, rose $3.51, or 3.3 percent to $109.68 a barrel by 07:57 a.m., while U.S. West Texas Intermediate crude advanced $3.07, or 3.2 percent to $98.75 a barrel.
The rebound followed sharp losses on Friday, when expectations that Washington and Tehran could reach an agreement pushed crude prices lower.
Brent had declined $3.43, or 3.1 percent on Friday to settle at $106.17 a barrel, while WTI dropped $3.40, or 3.4 percent to $95.68.
The latest price movement underscores how developments surrounding the Strait of Hormuz continue to dominate the global oil market.
U.S. President Donald Trump rejected Iran’s latest proposal for ending the conflict, according to Reuters, reducing expectations that an agreement capable of restoring normal shipping through the strategic waterway was imminent.
Negotiations have not completely ended, however, with further discussions expected this week.
The market has been highly sensitive to diplomatic developments because the Strait of Hormuz remains one of the world’s most important energy transportation routes.
Before the conflict, roughly one-fifth of global oil consumption moved through the waterway, connecting major producers in the Persian Gulf with customers in Asia and other international markets.
Restrictions on shipping through the strait have disrupted normal crude movements and increased transportation costs, forcing producers and traders to explore alternative export routes.
The renewed uncertainty has restored part of the geopolitical premium that disappeared from oil prices late last week when traders became more optimistic about a possible agreement.
However, physical crude exports from the Middle East have shown signs of recovery despite continued disruption around Hormuz.
Preliminary data from Kpler cited by Reuters showed Middle East crude exports averaging about 12.8 million barrels per day in September, the highest level since the conflict began in February.
Saudi Arabia and the United Arab Emirates have been central to the recovery as producers make greater use of alternative export infrastructure.
Saudi Arabia has increased flows through its East-West pipeline, which transports crude from production areas in the east of the kingdom to the Red Sea coast, allowing some exports to bypass the Strait of Hormuz.
The UAE also has pipeline infrastructure connecting its oil fields to the port of Fujairah outside the strait.
Those alternative routes have helped restore some supply to international markets, limiting the impact of continued disruption around Hormuz.
Nevertheless, the available bypass capacity is insufficient to completely replace the enormous volumes normally transported through the waterway.
That leaves crude prices vulnerable to changes in negotiations between Washington and Tehran and to further military developments in the region.
The supply concerns come as the oil market attempts to determine how quickly Middle Eastern producers can restore exports while the conflict continues.
A sustained reopening of the Strait of Hormuz could release additional barrels into the international market and reduce shipping costs, potentially removing some of the geopolitical premium currently embedded in crude prices.
Continued restrictions, on the other hand, would keep a substantial portion of global oil supply exposed to transportation bottlenecks and elevated freight costs.
Monday’s 3 percent increase therefore reverses much of Friday’s decline and highlights the volatility created by rapidly changing expectations surrounding the negotiations.
For oil-importing economies, sustained crude prices above $100 a barrel could increase fuel and transportation costs and reinforce inflationary pressures.
For exporters including Nigeria, higher international crude prices could strengthen petroleum export earnings, although the overall benefit would depend on production volumes, operating costs and the wider economic effects of elevated energy prices.
Traders will now focus on the next round of discussions between the United States and Iran for indications of whether both sides can narrow their differences and establish conditions for restoring normal shipping through the Strait of Hormuz.
Until there is a durable agreement or a significant improvement in shipping conditions, developments around the strategic waterway are likely to remain a major driver of global crude prices.
