Crude futures settled higher in after-hours trading on Monday as markets weighed reports that Iran will shift to an offensive military posture after efforts to negotiate a permanent end to the conflict with the US have stalled.
Front-month West Texas Intermediate crude futures climbed by 3.1% to $84.95 per barrel, while Brent futures rallied 2.9% to $91.11/bbl.
Soojin Kim, research analyst at MUFG, said that the US is preparing additional economic measures against Iran, while Iran is reportedly strengthening its military capabilities and regional alliances.
On Monday, an Iranian official reportedly said that entities must be prepared to escalate tensions in the Hormuz and the wider region, as talks between Tehran and Washington appear to be at a standstill after a 60-day truce expired.
Iran's Foreign Ministry spokesman, Esmail Baqaei, ruled out talks to extend the memorandum of understanding and alleged that the US violated the 60-day truce from the outset.
"We did not start any negotiations at all, and the US violated the understanding from the very beginning; therefore, the 60-day issue is not relevant," Baqaei said, according to Tasnim.
Iran's Islamic Revolutionary Guard Corps also said that 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.
The US and Iran agreed to an MoU on June 17 that was supposed to open the Hormuz while they negotiated a final deal on Tehran's nuclear program within 60 days.
Bjarne Schieldrop, chief commodities analyst at SEB Research, said that the US' path forward will be economic sanctions, which is "a very lengthy process" with a "highly uncertain outcome."
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.
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.
Meanwhile, commercial vessel traffic via the strait last week while vessel movements through the Bab el-Mandeb strait increased, according to the latest data from MarineTraffic.
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 attacks on Adnoc-linked ships.