Crude futures rose in after-hours trading on Monday after Iran ruled out talks to extend the memorandum of understanding with the US, as President Trump demanded that Iran surrender amid signals that shipments via the Strait of Hormuz are further declining.
Brent crude futures rose 0.7% to $89.16 per barrel, while Murban crude futures surged 6.7% to $95.45/bbl.
Saxo Bank strategists said crude trades steady, holding onto its geopolitical bid, with Brent near the top of its recent range at $89/bbl as fresh fighting in Lebanon and attacks on vessels in the Hormuz cloud the outlook for a deal to end the US-Iran war.
Iran's Islamic Revolutionary Guard Corps said on Monday it is prepared to respond to any threat or aggression as a 60-day truce with the US expires with no breakthrough in sight for talks to end the Middle East conflict.
Monday marked the day by which Tehran and Washington were expected to reach a final deal under a memorandum of understanding agreed in June.
On Monday, Trump reportedly threatened to bomb Oman if the Gulf state gets in the way of the American blockade of Iranian ships.
The US president also reiterated Washington's stance that Iran must agree to give up on possessing nuclear weapons, and said backchannel talks were on between the US and the IRGC.
Iran's Foreign Ministry spokesman, Esmail Baqaei, said the country did not begin any negotiations at all, and that the US "violated the understanding from the very beginning; therefore, the 60-day issue is not relevant," according to a Tasnim report.
However, Baqaei said talks with Oman over a deal to manage the Hormuz were continuing and were taking a long time due to the complexity of the subject.
The rhetoric comes after Trump signaled that the administration intends to hit Iran's economy even harder, with US Treasury Secretary Scott Bessent saying that new economic curbs could be unveiled this week.
Bjarne Schieldrop, chief commodities analyst at SEB Research, said that the US is out of options and that economic sanctions will be the way forward. However, Schieldrop said sanctions are a "very lengthy process" with a "highly uncertain outcome."
On the supply front, commercial vessel traffic via the strait last week while vessel movements through the Bab el-Mandeb strait increased, according to MarineTraffic data.
Confirmed crossings through Hormuz dropped 19.5% to 95 vessels last week from 118 in the week prior, MarineTraffic data showed, while traffic through Bab el-Mandeb, the southern gateway to the Red Sea, increased 6.7% last week to 254 crossings from 238.
On Saturday, the UAE said that a "hostile Iranian attack" had targeted an Adnoc-affiliated vessel while it was transiting the strait. The incident followed two other Adnoc-affiliated ship attacks.
Soojin Kim, research analyst at MUFG, said that continued geopolitical uncertainty and risks to key shipping routes are keeping a substantial risk premium embedded in crude prices.