Oil Prices Rise Above $110 Amid Delayed US Response to Iran Diplomatic Initiative

Oil Prices Surge to Three-Week High Amid Ongoing Tensions in the Strait of Hormuz

Oil prices rose to a three-week high above $110 a barrel in London on Monday, as traders anxiously awaited the US response to a proposal from Tehran to end the war and reopen the crucial Strait of Hormuz. Brent crude traded above $111, bringing the gain this week to almost 6%, while West Texas Intermediate was above $98.

The proposed ceasefire has broadly held since early April, but blockades by Iran and the US have reduced daily transits of the Strait of Hormuz to near zero. The closure has choked off flows of crude, natural gas, and oil products, driving up energy prices and raising concerns about inflation.

US President Donald Trump convened a meeting to discuss Iran's proposal, but maintained "red lines" on any deal to end the war, including preventing Tehran from obtaining a nuclear weapon. The proposal, which was conveyed through Pakistani mediation, suggests that the conflict could end if the US lifts its naval blockade, agrees to a new legal framework for traffic transiting the strait, and guarantees there will be no future military action against Iran.

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Iranian media reported that Foreign Minister Abbas Araghchi would convey the proposal to Pakistani officials, emphasizing the need for a US commitment to lifting the naval blockade and establishing a new legal framework for traffic in the strait.

However, US officials remain skeptical of Iran's proposal, and the White House is likely to offer its response and counterproposals in the coming days. US Secretary of State Marco Rubio suggested that Iran still wanted to retain control of the Strait of Hormuz, which he cast as unacceptable to the US.

Prior to the war, about one-fifth of the world's oil and liquefied natural gas flowed through the narrow waterway. The American cordon on shipping to and from Iranian ports, which started on April 13, has turned away dozens of vessels. Iran is rapidly running out of places to store its crude, raising the prospect that it may be forced to cut output further, according to data analytics firm Kpler.

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US Treasury Secretary Scott Bessent noted that the Iranian oil industry was "starting to shut in production" due to the blockade. Market analysts, including Linh Tran of XS.com in Ho Chi Minh City, Vietnam, warn that futures markets are pricing in a prolonged supply tightening scenario and geopolitical risks remain elevated. However, they also suggest that any meaningful progress in negotiations could trigger a sharp correction.