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EMEA Oil Update: Oil Firms as Diplomatic Hopes Counter Houthi Red Sea Blockade

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Oil prices firmed on Monday, as optimism regarding renewed US-Iran peace negotiations gave pause to fears of a widening conflict.

The Brent futures contract rose 0.5% to $88.57 per barrel. Murban futures edged up 0.1% to $81.42 per barrel.

A senior Iranian official said that mediators have proposed a 10-day ceasefire to revive diplomatic peace efforts, Reuters reported.

The supply outlook has been further complicated by Yemen's Houthi movement, which has reportedly declared a naval blockade against Saudi Arabia.

Prices had surged to their highest in more than a month earlier in the session following a weekend of military exchanges between the US and Iran, which included strikes on regional energy infrastructure and the effective cessation of commercial tanker traffic through the Strait of Hormuz.

According to LSEG data, maritime activity in the vital waterway has plummeted, with only two outbound tankers recorded and zero inbound traffic, effectively reverting flow levels to those seen prior to the now-defunct Memorandum of Understanding, ING analysts noted.

With attacks spreading to Kuwaiti infrastructure and Caspian pipeline terminals, markets face a critical supply shock.

Reports indicate that Iran has directed Houthi proxies in Yemen to prepare for the closure of the Bab el-Mandeb Strait should the US target Iranian power infrastructure.

Such a move would severely disrupt Saudi Arabian exports, forcing tankers to take longer, more expensive routes, analysts said.

With US Strategic Petroleum Reserve releases scheduled to cease by the end of July, the market is becoming increasingly vulnerable, ING added.

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