Brent holds above $83 as Tehran demands U.S. concessions before reopening strategic waterway; softer jobs data cuts September Fed hike bets to 44%
Oil prices were little changed on Monday as optimism over efforts to reopen the Strait of Hormuz was tempered by Iran’s insistence that Washington meet a series of demands before the strategically vital waterway can fully reopen.
Brent crude futures were up 19 cents at $83.74 a barrel by 0807 GMT, while U.S. West Texas Intermediate crude futures gained 3 cents to $78.21. Both benchmarks fell more than 7% last week as investors bet that Iran and Oman were nearing an arrangement that could restore shipping through the strait.
The price action shows the market is balancing two competing forces. A credible reopening would remove a substantial geopolitical risk premium from crude, while any breakdown in diplomacy or fresh attacks on energy infrastructure could quickly reverse last week’s decline.
“Any major progress towards restoring unrestricted shipping could exert downward pressure on oil prices, while a breakdown in negotiations or renewed supply disruptions could quickly revive the geopolitical risk premium,” said Sugandha Sachdeva, founder of New Delhi-based SS WealthStreet.
The Strait of Hormuz is one of the world’s most important energy chokepoints. Before the Middle East conflict that began in late February, about a quarter of global seaborne oil trade and roughly a fifth of global liquefied natural gas shipments passed through the waterway.
Iran said Sunday that discussions with Oman had reached their final stages, but Tehran made clear that an agreement on transit arrangements would not by itself reopen the strait.
Iranian Foreign Minister Abbas Araghchi said Iran and the United States are not currently engaged in negotiations and that Tehran would not resume talks while Washington continues to violate an interim agreement reached in June.
“There is no possibility of restarting negotiations” while the U.S. continues violating the June memorandum of understanding, Araghchi said, according to Tasnim News Agency. He added that Iran would require compensation for what it described as U.S. “violations.”
“Intermediaries are still making efforts to find ways to resume negotiations,” Araghchi said.
Tehran has presented a sweeping list of conditions for reopening the waterway, including an end to the U.S. naval blockade and sanctions, the withdrawal of American troops from the region, payment of war reparations and the release of frozen Iranian assets. Oman, which has been mediating between the sides, said its discussions with Tehran were progressing in a “positive and constructive atmosphere”. Muscat also called for an end to repeated attacks on vessels transiting the strait to create room for diplomacy.
The distinction between an agreement on transit routes and a full reopening of Hormuz is important for energy markets. Even if Iran and Oman finalize arrangements governing navigation, the broader military confrontation could continue to constrain shipping and keep insurance and freight costs elevated.
Maritime Pressure Remains High
The risk to energy supplies remains acute.
U.S. Central Command said American forces redirected another 20 commercial vessels away from Iranian ports last week under a naval blockade, taking the total number of vessels redirected since the operation began to 55 as of Sunday, up from 35 on Aug. 2.
U.S. forces have also disabled two ships and boarded two others to enforce compliance, according to the command.
The growing number of vessel diversions highlights the gap between diplomatic optimism and conditions at sea. Shipping companies continue to face uncertainty over whether vessels can safely use the waterway or alternative routes.
Iranian strikes in and around Hormuz, together with attacks by Iran-aligned Houthi forces in the Red Sea, have kept pressure on commercial shipping.
The United Arab Emirates said Saturday that Iran had launched a missile at an oil tanker owned by Abu Dhabi National Oil Company while it was attempting to transit the Strait of Hormuz early Saturday.
The Iran-aligned Houthis separately claimed responsibility Sunday for an attack on an oil refinery in Saudi Arabia and equipment in Yemen’s Red Sea port city of al-Makha. The Houthis had also attacked Saudi Aramco’s Jazan refinery on Sunday, according to reports, adding another potential threat to regional energy infrastructure.
The attacks came two days after Saudi Arabia signed a defense pact with Turkey and Pakistan as regional tensions intensified. ADNOC said Friday that 15 of its vessels had been attacked while transiting the Strait of Hormuz since the beginning of the conflict.
The cumulative disruptions mean that even a diplomatic breakthrough could take time to translate into normal shipping patterns. Tankers, insurers and commodity traders are likely to require evidence that the route is consistently safe before fully restoring previous traffic levels.
U.S. President Donald Trump, who expressed confidence last week that Washington and Tehran could reach an agreement, indicated that his administration was prepared to allow economic pressure on Iran to intensify rather than immediately launch another military offensive.
“We are low keying it,” Trump told Axios. “We are only semi-negotiating with them. We are just watching Iran with its huge inflation and the fact they have no money.”
Trump also posted a chart on Truth Social showing the decline in the Iranian rial’s value since 2025, accompanied by the words “Iran has no money” and “currency is trash.”
The comments suggest that Washington is seeking to use economic pressure as leverage while leaving room for diplomacy, although Tehran’s demands remain substantially broader than the conditions Washington has publicly indicated it is prepared to accept.
Treasury Yields Await Inflation Test
U.S. Treasury yields edged lower at the start of the week as investors turned their attention to a packed economic calendar, with Wednesday’s consumer inflation report likely to be the most important release for Federal Reserve policy expectations.
At 3:58 a.m. ET, the 10-year Treasury yield was down just over 1 basis point, while the 30-year yield also declined about 1 basis point. The two-year Treasury yield was little changed.
A basis point is one-hundredth of a percentage point, and bond yields move inversely to prices.
The shift in rate expectations follows Friday’s unexpectedly weak U.S. employment report. The economy shed jobs in July, while employment gains for the previous two months were revised sharply lower.
The data reduced expectations that the Federal Reserve would raise interest rates at its September meeting. Deutsche Bank analysts said the jobs report had “reduced the urgency for further Fed tightening in the near term.”
Markets now price roughly a 44% probability of a September rate increase, down sharply from 67% a week earlier, according to CME Group’s FedWatch tool.
The next major test will be July’s core consumer price index, due Wednesday at 8:30 a.m. ET. Core CPI excludes food and energy and will therefore provide a cleaner indication of underlying inflation pressures.
The inflation report could “go a long way towards tipping the balance for September FOMC pricing,” Deutsche analysts said.
The producer price index follows on Thursday, while weekly initial jobless claims and July retail sales are due Friday. The preliminary University of Michigan consumer sentiment survey will also provide a fresh reading on household expectations.
For markets, the policy dilemma is becoming sharper. A weak labor market gives the Fed more reason to ease policy, but a renewed rise in inflation could force investors to price out rate cuts or even revive expectations of another hike.
Dollar Remains Under Pressure
The U.S. dollar steadied near a two-month low on Monday after the weak employment report reinforced expectations that the Federal Reserve may have less need to tighten monetary policy.
“The labor market data was a negative event for the dollar,” said Francesco Pesole, FX strategist at ING.
“We think the bias remains negative this week but if we get a hot break on CPI, markets are going to be back to pricing in a rate hike as their baseline.”
The dollar index, which measures the U.S. currency against six major peers, was little changed at 99.62 after touching its lowest level since June 15 on Friday.
The euro was broadly flat at $1.1563, near its strongest level since mid-June, while sterling was steady at $1.3496.
The yen weakened to 158.52 per dollar, continuing to surrender some of the gains triggered by last week’s historic intervention by Japan and the United States. The currency remains stronger than its roughly 164 per dollar level reached late last month.
Positioning data show that investors have rapidly reduced bearish bets against the yen. The Commodity Futures Trading Commission said the net short yen position fell by $8.865 billion to $3.604 billion in the week through Aug. 4.
That was the largest weekly decline in the absolute size of the net short position since March 2014.
At the same time, speculators increased their net long dollar position to its highest level since December 2022, highlighting the divergence between the dollar’s recent price weakness and positioning among some investors.
Hormuz Remains The Critical Variable For Oil
For energy markets, the diplomatic process remains the dominant near-term variable. A sustained reopening of the Strait of Hormuz would remove one of the largest immediate threats to global energy supply and could push Brent materially lower by eliminating part of the geopolitical premium embedded in crude prices.
However, analysts note that the downside could be limited if shipping companies remain reluctant to return to the route or if attacks continue in Hormuz and the Red Sea. Conversely, any collapse in negotiations, renewed attacks on tankers or damage to major oil infrastructure could rapidly push crude higher.
That tension explains why Brent remains above $83 even after last week’s sharp decline. Traders are pricing in the possibility of a diplomatic solution while maintaining a premium for the risk that the world’s most important oil chokepoint remains effectively constrained.
