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US Oil Update: Crude Settles Higher as Markets Monitor Iran-Oman Hormuz Developments

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Crude futures climbed almost up 5% in after-hours trade on Thursday as markets weighed hopes for a shipping corridor through the Strait of Hormuz with renewed uncertainty over potential restrictions on vessels using the strategic waterway.

Front-month West Texas Intermediate crude futures climbed by 4% to $77.88 per barrel, while Brent futures advanced 4.8% to $83.25/bbl.

Earlier on Thursday, Iran and Oman were reportedly close to finalizing a deal on shipping through the Strait, as both Iran and the US signaled that an agreement could be announced soon.

On Wednesday, Iran's Foreign Ministry spokesman Esmaeil Baqaei said Iran and Oman had reached an understanding on the geographic coordinates for a shipping route through the Hormuz, and a joint announcement is being finalized.

Baqaei said talks between Iran and Oman had been underway for the past two months to establish a safe passage mechanism for commercial vessels transiting the strategic waterway.

Saxo Bank strategists said reports that Iran and Oman had agreed to establish a shipping corridor through the Hormuz marked a step toward reopening the strategic waterway and raised expectations of higher Middle East energy exports.

Despite the potential for progress, uncertainty remained over access through the waterway.

An Iranian lawmaker reportedly said a parliament committee was reviewing a preliminary bill to ban US, Israeli and other vessels deemed hostile from the Hormuz, and fine violators up to 20% or a fifth of cargo value.

The restrictions would extend to "countries and individuals that have caused damage to Iran" until that harm is "compensated."

ING strategists said that the real hinge point is the trajectory of US-Iran discussions, because meaningful progress there is essential before disrupted energy flows can realistically resume.

Responding to questions from the press during a White House event on Thursday, President Donald Trump said the Strait of Hormuz was "sort of open right now."

He added that the US naval blockade on Iranian ports remained firmly in place and that he was involved in negotiations, with a deal potentially coming soon.

Adding to regional supply concerns, Yemen's Houthis launched attacks in central and eastern Yemen on Thursday, resulting in the death and injury of "hundreds" of internationally recognized government troops.

The attack comes a day after the group attacked a Saudi oil tanker in the northern Red Sea off the coast of Yanbu.

Houthi spokesperson Yahya Saree said that the Iran-aligned militant group plans to expand operations into the northern Red Sea after alleging that Saudi tankers had begun rerouting away from the Bab el-Mandeb Strait.

Meanwhile, Iran reportedly warned Gulf states that any new US attack on its territory would trigger retaliation against critical energy infrastructure across the region.

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