EMEA crude futures pared gains in after-hours trading on Tuesday after Pakistan reportedly said that the US and Iran are "close to some sort of arrangement" over the reopening of the Strait of Hormuz, even as the two sides trade demands over war reparations.
Brent crude futures were up 0.7% to $88.32 per barrel, while Murban crude futures advanced by 3.8% to $88.15/bbl.
Gelber & Associates said crude remains sensitive to the headlines, particularly with limited US Strategic Petroleum Reserve coverage, as another setback in negotiations could send prices higher while credible progress toward restoring shipping flows would likely reverse some of the latest gains.
The energy markets are weighing conflicting signals on whether the US and Iran will strike a deal to increase traffic via Hormuz.
On Tuesday, Pakistan's Defense Minister reportedly said that the US and Iran are "close to some sort of arrangement" on the Strait as talks between Oman and Iran over shipping routes in the strategic waterway are said to have also reached an advanced stage.
Pakistan and Qatar have been the main mediators in the Middle East conflict.
Meanwhile, President Trump on Tuesday alleged that Iran is an unfair negotiator, while describing some of his current options in the conflict, "just bop along" and let Tehran fail economically or hit them "really, really hard," according to media reports.
Iranian Foreign Minister Abbas Araqchi, on the other hand, said that securing the Hormuz requires an end to US aggression, including the blockade of Iranian ports.
The secretary of Iran's Supreme National Security Council also said the key chokepoint would remain closed unless the US meets Tehran's conditions.
Soojin Kim, research analyst at MUFG, said with diplomatic positions hardening, global inventories already tight and alternative export routes facing security risks, the prolonged disruption to Hormuz is likely to keep a sizeable geopolitical premium embedded in oil prices.
However, despite reported signs of progress in talks to reopen the Hormuz, the United Kingdom Maritime Trade Operations reported two new attacks on ships in the Gulf of Oman and the Red Sea, highlighting the widening threat to maritime trade.
Three crew members were killed in a suspected attack in the Bab el-Mandeb strait between the Red Sea and the Indian Ocean, while a container ship was hit by a missile off the Pakistan coast, UKMTO said.
On the supply side, US Energy Secretary Chris Wright posted on X on Tuesday that crude flows out of the Arabian Gulf have risen to about 15 million barrels per day as shipping through the Hormuz recovers with the help of the US military and Gulf allies.
The seven-day average for oil moving through the Strait of Hormuz has climbed to almost 9 million b/d, Wright said, while another 5 million to 7 million b/d are being exported through newly upgraded pipelines and facilities that bypass the strategic waterway.
"On Sunday alone, over 20 million barrels left the Arabian gulf region, which is above the pre-conflict average," Wright said.
The US Energy Information Administration, in its August Short-Term Energy Outlook, projected that global production and trade patterns will return to pre-conflict conditions by early 2027, though some Persian Gulf producers may not restore output to previous averages.