Oil Prices Rise as Fading US-Iran Peace Hopes Raise Supply Risks
Oil prices climbed for a third session on Tuesday, August 18, 2026, as prospects for a diplomatic end to the Middle East conflict faded. Iran announced a shift to a fully offensive military posture, and Washington ruled out extending a temporary ceasefire, heightening immediate energy supply risks across global markets according to market reports from Reuters and The Economic Times.
Crude Futures Rally to Multi-Week Highs Amid Middle East Escalation
Brent crude futures climbed 89 cents, or 1%, to $91.76 a barrel by 0641 GMT on Tuesday, building on gains from Monday to reach their highest level since July 30 according to Reuters reporting. Simultaneously, U.S. West Texas Intermediate (WTI) crude futures rose $1.05 to $85.55 a barrel, touching their highest mark since July 31. These moves reflect mounting trader anxiety over supply disruptions stemming from the ongoing conflict launched by the United States and Israel against Iran on February 28.
Negotiations for a permanent ceasefire have ground to a halt. A senior Iranian official confirmed to Reuters on Monday that Tehran will adopt a fully offensive military stance. Washington countered by definitively ruling out any extension of the existing temporary ceasefire pact. Outward progress toward resuming normal oil tanker traffic through the strategic Strait of Hormuz has completely stalled.
“Oil has jumped to start the week as U.S.-Iran relations look increasingly shaky. A deal to reopen the Strait of Hormuz still does not appear to be in sight, and shipping numbers remain at a trickle,” noted Tim Waterer, chief market analyst at KCM.
The Dual Chokehold on Strategic Energy Corridors
Shipping metrics underscore the severity of the transit bottleneck. Ship-tracking data compiled by Kpler shows that following persistent attacks on maritime vessels, only five commodity carriers transited the Strait of Hormuz on Saturday, with precisely zero vessels registered for the crossing on Sunday. This compares starkly with 31 transits during the prior weekend.
Compounding the regional maritime crisis, Yemen’s Houthi rebels launched missile strikes targeting what they described as a Saudi military ship and four escort vessels in the Red Sea. Houthi military spokesperson Yahya Saree confirmed the operation via the Telegram messaging app.
“The dual chokehold on the Strait of Hormuz and the Bab el-Mandeb remains highly significant. These are not secondary concerns. They sit at the centre of the current supply-risk narrative,” KCM analyst Waterer explained.
Diplomatic Impasses and Near-Term Price Projections
Diplomatic channels remain fractured despite sporadic back-channel maneuvers. Reports indicate that Trump opened back-channel discussions with the Islamic Revolutionary Guard Corps. Concurrently, Iran has pursued separate negotiations with Oman regarding the management of the Strait of Hormuz, claiming proximity to a bilateral agreement. However, those regional talks triggered a sharp response from Trump, with threats directed at Oman—a longstanding U.S. security partner.
“The lack of any kind of deal will have an impact on oil price expectations further out in 4Q and even in 2027,” stated Suvro Sarkar, head of energy research at DBS Bank. Sarkar projects that while deal-related uncertainty persists, benchmark crude prices will likely sustain a trading range between $80 and $100 a barrel over the near term.
On the domestic inventory front, preliminary Reuters polling data released on Monday indicated that U.S. crude oil stockpiles likely dropped last week alongside broader petroleum product inventories.