• Brent crude briefly climbed back above $100 a barrel, while US crude turned positive, as Iran rejected a US proposal regarding the Strait of Hormuz.
  • The rejection escalates tensions around the key oil chokepoint, adding risk premia to global oil prices.
  • Traders are now eyeing potential supply disruptions and diplomatic moves, with volatility expected to persist.

Oil Prices Reverse as Iran Dismisses US Deal

Oil futures staged a sharp reversal on Thursday, paring earlier losses and pushing Brent back over the symbolic $100-a-barrel mark, after a Wall Street Journal report revealed that Iran had dismissed a US proposal to secure the Strait of Hormuz as unrealistic. West Texas Intermediate also turned positive, reflecting the market's heightened sensitivity to geopolitical risks in the Middle East.

According to people familiar with the matter, Iranian officials rejected the framework put forward by Washington, which aimed to guarantee the free flow of oil through the strategic waterway. The Strait of Hormuz handles about a fifth of the world's oil consumption, making any threat to its operation a potent driver of price spikes. The rejection comes amid broader efforts to de-escalate tensions, but the impasse has instead intensified concerns about potential supply disruptions.

"The market is pricing in a non-zero risk of a real disruption," said a senior trader at a European energy hedge fund. "Every headline from the region moves prices because the stakes are so high." The trader spoke on condition of anonymity to discuss market-sensitive views. Attempts to reach the Iranian mission to the UN for comment were unsuccessful.

Market Context and Implications

The move underscores the fragile balance between supply and demand, with global inventories already tight due to post-pandemic recovery and sanctions on Russian oil. Any prolonged closure of the Strait of Hormuz could force tankers to take longer alternate routes, squeezing supply and lifting costs for importers. Analysts note that while the US and allied navies have conducted patrols to reassure markets, a diplomatic solution remains elusive.

"The risk of a miscalculation is real," said a Middle East policy analyst at a Washington-based think tank. "Both sides seem dug in, and that uncertainty is keeping the risk premium elevated."

Traders are now watching for further diplomatic signals, as well as weekly inventory data and OPEC+ commentary, to gauge the next move. For now, volatility is expected to remain high, with prices swinging on each new headline.

Correction: An earlier version of this article misstated the timing of the price reversal. It has been updated to reflect the most recent trading data.