Oil prices moved sharply higher on Monday as uncertainty surrounding the Strait of Hormuz returned to the centre of the market.
Brent crude futures rose $3.98, or 3.82%, to $108.30 a barrel by 09:59 GMT, while WTI gained $3.52, or 3.81%, to $95.93. The latest move followed an earlier rise of more than 2%, showing how quickly the market repriced supply risk as diplomatic expectations weakened.
The immediate catalyst was the lack of progress between Washington and Tehran. Iran has maintained conditions for reopening the Strait, including reduced U.S. military pressure, the lifting of restrictions on Iranian oil sales and a ceasefire. U.S. President Donald Trump rejected Iran’s proposal but has indicated that further negotiations could take place this week.
That leaves traders facing two competing forces. Diplomatic progress could increase crude flows and put downward pressure on prices, while another breakdown in negotiations could extend supply uncertainty and keep the risk premium elevated.
Hormuz Flows Are Improving, But Supply Is Still Constrained
The latest data also complicate the supply picture.
Reuters reported that crude exports from key Middle Eastern producers increased to 12.8 million barrels per day in September, the highest level since the conflict began. Shipments through the Strait of Hormuz were expected to reach about 7.4 million barrels per day this month.
However, regional exports remained around 6 million barrels per day below February’s 18.8 million barrels per day, according to Kpler data cited by Reuters. This suggests that some flows have recovered without fully removing the market’s supply deficit.
The Strait is particularly important because it previously carried around one-fifth of global crude oil and liquefied natural gas supplies. Reduced shipping activity therefore remains a major variable for crude and refined-product markets.
Refined Products Add Another Risk
Traders are also watching diesel markets closely.
European and U.S. diesel prices have reached record levels as disruptions affecting Middle Eastern and Russian oil and refined-product exports tighten fuel supplies. Reuters reported that Goldman Sachs estimated a U.S. diesel export ban could raise European wholesale diesel prices by about $3 a barrel for every week it remained in place.
This creates an additional risk for markets because a prolonged rise in fuel prices could feed into broader inflation expectations.
Oil Is Increasing Rate and Market Risk
The oil rally is already spilling into other asset classes.
Reuters reported that global stocks fell on Monday as crude prices climbed, while the U.S. dollar moved toward a two-month high. The U.S. 30-year Treasury yield also rose to 5.517%, close to its highest level since 2004.
Gold has moved in the opposite direction. Spot gold fell around 3% to $4,156.45 an ounce by 08:14 GMT, reaching its lowest level in more than seven weeks. Higher oil prices are reinforcing inflation concerns and expectations for higher interest rates, reducing the appeal of a non-yielding asset such as gold.
For traders, this creates an important cross-market relationship: higher oil → greater inflation risk → higher-rate expectations → stronger dollar and yields → pressure on gold and risk assets.
What Could Move Oil Next?
The next major driver is likely to be developments in U.S.-Iran negotiations and evidence of actual shipping flows through Hormuz.
A credible agreement that allows the Strait to reopen more normally could remove part of the geopolitical premium from crude. Conversely, further deterioration in negotiations, renewed attacks or a reduction in physical oil flows could keep supply concerns elevated.
For now, the market is balancing improving regional exports against the possibility that the broader supply deficit persists. That makes headline risk particularly important for Brent and WTI traders.
Key Market Impact
| Market | Current Impact | Main Driver |
|---|---|---|
| Brent crude | Higher, above $108 | Hormuz uncertainty and supply risk |
| WTI crude | Higher, near $96 | Geopolitical risk and tighter supply expectations |
| U.S. dollar | Firmer | Safe-haven demand and higher-rate expectations |
| Gold | Lower | Higher oil-driven inflation and rate-hike expectations |
| Global stocks | Under pressure | Higher energy costs and bond yields |
| Treasury yields | Higher | Inflation concerns and monetary-policy expectations |
The market moves above are based on the latest available Reuters reporting on September 28.
Trader Insight
The key issue for crude traders is no longer simply whether the Strait of Hormuz is technically open. The market is watching whether oil can move through the route at volumes sufficient to ease the wider supply deficit.
That distinction matters. Regional exports have recovered, but they remain below pre-conflict levels. If flows continue improving, crude could lose some of its geopolitical premium. If negotiations fail and physical flows deteriorate again, the risk premium could remain elevated.
Traders should therefore watch the relationship between Brent prices, Hormuz shipping flows, refined-product prices, Treasury yields and the U.S. dollar, rather than treating the oil move in isolation.
What to Watch Next
- U.S.-Iran negotiations: Any confirmed progress could quickly change oil’s risk premium.
- Strait of Hormuz shipping volumes: Sustained increases would ease supply concerns.
- Brent and WTI price reaction: Watch whether the latest spike holds or reverses as diplomatic headlines emerge.
- Diesel prices: Continued strength could reinforce broader inflation concerns.
- U.S. Treasury yields and Fed expectations: Higher energy prices could strengthen the market’s higher-for-longer rate view.
- Gold and the U.S. dollar: Their reaction will help show whether inflation and rate concerns are dominating traditional geopolitical safe-haven demand.