Oil prices surged over 2% Monday before falling back as stalled U.S.-Iran diplomacy and continuing disruptions in the Strait of Hormuz drove a fresh risk premium into crude markets, with Brent rising to $107.8 per barrel at 6:30 a.m. ET, and U.S. WTI reaching $96.40 while equity futures turned lower on fears the energy shock could reignite inflation.
Murban crude traded at $104.8 and the OPEC basket rose to $108.3, while gains in gasoline and heating oil showed traders were pricing a broader supply threat tied to Hormuz disruptions.
The move accelerated after plans for a second round of peace talks between Washington and Tehran broke down and President Donald Trump canceled a U.S. negotiating mission over the weekend. At the same time, tanker constraints through the Strait of Hormuz kept supply fears elevated around a route that normally carries about a fifth of global crude and LNG flows.
The oil rally hit risk assets before the U.S. open, with markets repricing the possibility that sustained crude near $100 or higher could harden the Federal Reserve’s stance just as investors head into a packed week of major technology earnings.
The market is also beginning to price the supply story beyond crude. Higher gasoline and heating oil prices are feeding concern that the conflict is moving into transport, manufacturing and consumer costs.
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Also on Monday, Iranian Foreign Minister Seyed Abbas Araghchi arrived in St. Petersburg for talks with President Vladimir Putin as Tehran pursued diplomacy outside the U.S. channel. In parallel, Iran has presented a proposal through regional mediators to reopen the Strait of Hormuz and move toward ending the war first, while postponing nuclear negotiations. The proposal would separate shipping security from the dispute over uranium enrichment, where negotiations have deadlocked.
As of the time of writing, it is unclear whether Washington will accept that order of operations, with Trump expected to meet with his national security team in the Situation Room on Monday as the White House weighs next steps. Trump said over the weekend he wants to maintain pressure through the blockade, arguing the squeeze on Iranian oil exports strengthens U.S. leverage.
By Charles Kennedy for Oilprice.com
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