Oil prices edged higher on Tuesday as traders questioned whether Monday's steep sell-off had fully priced in a diplomatic breakthrough that may not exist. Brent crude rose 1.3% to $84.89 a barrel, while West Texas Intermediate gained 1% to $81.11, recovering part of the previous session’s fall. The reversal came after Iran denied US President Donald Trump’s claim that negotiations were underway to reopen the Strait of Hormuz, the critical chokepoint for global oil shipments.
The earlier losses were triggered when President Trump called off military strikes against Iran and suggested talks could restore safe passage through the strait. Crude tumbled more than 5% on Monday, with WTI falling 6.9% to $78.85. Trump’s announcement came amid growing pressure over fuel prices, which have surged more than 30% since the US-Iran war escalated. He had publicly excoriated ExxonMobil and Chevron, demanding they lower retail fuel costs after the companies reported a combined $26.5 billion in second-quarter profits.
Trump said the oil majors were “making too much money based on a shortage,” and urged them to pass gains back to consumers. ExxonMobil earned $14.5 billion in the quarter, more than double the previous year, while Chevron posted $12.1 billion—nearly five times its year-ago result. The president’s criticism marked a rare rebuke of an industry he has traditionally supported.
However, Iran’s foreign ministry swiftly declared no direct negotiations with Washington were taking place and that talks with Oman only concerned commercial vessel routes. A new attack on a cargo ship near Oman further undermined the peace narrative. JPMorgan estimates each month of Strait of Hormuz disruption could add $7 to $8 per barrel to Brent crude, while Goldman Sachs sees a scenario where Brent surges above $120 if flows are severely constrained.
The renewed uncertainty left traders cautious. While a genuine peace deal could push crude lower by normalizing shipping and inventories, the upside risk from another attack or failed negotiation remains explosive. Analysts noted that longer-term supply increases from OPEC+ and non-OPEC producers may eventually cool prices, but for now the geopolitical premium persists—and with it, pressure on global inflation and risk assets.
