Oil prices jump 5% as US-Iran talks on Strait of Hormuz stall

Oil prices jumped roughly 5 percent Monday as expectations dimmed that the United States and Iran would quickly agree on reopening the Strait of Hormuz.

Brent crude futures for October delivery settled at $87.72 a barrel on the ICE Futures Exchange, up 5.0 percent from the previous session. West Texas Intermediate futures for September delivery closed at $82.13 a barrel on the New York Mercantile Exchange, a gain of 5.1 percent.

Market optimism over a reopening of the strait has rapidly cooled as both sides pile on additional demands, making a deal increasingly difficult to reach.

Iran laid out six preconditions for reopening the strait on Aug. 8, going beyond the terms of the ceasefire MOU the two countries signed in June. The demands included lifting the US maritime blockade, a permanent halt to attacks, the withdrawal of US forces from areas surrounding Iran, compensation for damage caused by recent airstrikes, the removal of sanctions against Iran, and the release of frozen Iranian assets with no preconditions attached. Analysts broadly view the conditions — particularly the unconditional release of frozen assets — as more stringent than what was agreed in the June MOU.

President Donald Trump pushed back Monday, saying Iran should pay reparations for past acts of terrorism and the killing of protesters at home. The reversal came just one day after Trump described the negotiations as proceeding in a "low-key" manner and signaled restraint, only to flatly reject Iran's demands the following day.

Concerns about further supply disruptions in the Middle East added to upward pressure on prices. Yemen's Houthi rebels, who are aligned with Iran, said Monday they had attacked an Aramco refinery in the Jizan region of Saudi Arabia.

Continued Ukrainian strikes on Russian energy facilities also pushed prices higher. Dennis Kissler, senior vice president at BOK Financial, said crude futures were rising as a US-Iran deal appeared likely to be delayed and Ukraine launched additional attacks on Russian refineries and oil tankers in the Black Sea. He added that Iran's new demands had led most traders to conclude that tight supply conditions would persist in the near term.

The US Strategic Petroleum Reserve fell by about 6.1 million barrels last week to 298.7 million barrels, according to the Department of Energy — the lowest level since January 1983, a 43-year low.