Oil Gains as Hormuz Reopening Uncertainty Persists; Iran Sets Conditions

Oil prices extended gains in US trading, as uncertainty over the full reopening of the Strait of Hormuz and persistent Middle East tensions kept a risk premium in place. Iran reiterated several conditions before agreeing to a complete reopening of the strait. According to Al Jazeera, Ali Shamkhani, secretary of Iran's Supreme National Security Council, said those conditions include ending the US naval blockade and the withdrawal of US naval and air forces from around Iran. Tehran also demands compensation for losses from recent conflicts, the lifting of sanctions, and the unconditional unfreezing of Iranian assets. These demands have reduced the likelihood that shipping returns to normal quickly, which helps keep the risk premium in WTI prices. Meanwhile, negotiations with Oman over establishing a safe shipping lane through the Strait of Hormuz appear to be making progress. Still, the lack of a full reopening agreement leaves investors cautious about the risk of prolonged oil supply disruption. Tensions in the region are not limited to the strait. Yemen's Iran-backed Houthi group claimed a drone attack on Saudi Arabia's Aramco refinery. The latest strike on a major energy facility has heightened market worries about the security of regional oil supplies.