Brent crude remained elevated near the $90 threshold on Monday as a sharp slowdown in tanker traffic through the Strait of Hormuz and the breakdown in US-Iran diplomacy kept a geopolitical risk premium in energy markets. Brent rose as much as 1% to $89.40 a barrel, while West Texas Intermediate advanced to $82.83. Both benchmarks had already gained more than 5% last week after attacks on tankers and Saudi energy infrastructure reignited supply disruption concerns.
Hormuz disruptions remain the immediate price floor. Shipping activity through the strait has slowed dramatically: only five commodity vessels crossed on Saturday and none were recorded on Sunday, compared with 31 on the previous weekend. Iran's Foreign Minister Abbas Araqchi said Tehran has not decided to resume negotiations with the United States, while the UAE accused Iran of targeting another ADNOC-operated tanker. Israeli strikes in southern Lebanon killed at least 11 people over the weekend, adding another layer of regional risk.
AMP chief economist Shane Oliver expects crude to remain broadly within a $70-$100 range while the Hormuz impasse persists. He noted that constrained Middle East exports are putting a floor under prices, but weaker global demand is limiting the upside.
Demand forecasts are capping the rally. The International Energy Agency now expects global oil demand to decline by 1.6 million barrels a day in 2026, a larger contraction than projected last month. It sees demand falling 2.8 million barrels a day year on year in the third quarter. OPEC remains more optimistic, forecasting demand growth of 580,000 barrels a day this year, although its estimate has also been cut repeatedly.
The US Energy Information Administration expects Brent to average about $85 a barrel in the third quarter before easing toward $78 in the fourth as shipping conditions improve and shut-in production gradually returns. ING commodity strategists also said in a recent analysis that elevated Brent prices are fundamentally tied to supply-side risks, including geopolitical tensions, OPEC+ production decisions, sanctions on major exporters, and limited spare capacity. ING noted that unless there is a significant easing of these risks, prices are likely to stay supported in the near term.
For traders and consumers, the environment points to heightened volatility and careful risk management. A further collapse in Hormuz traffic could push Brent through $90 quickly, while any credible diplomatic breakthrough would expose crude to the increasingly soft consumption outlook.
