Oil Surges as Strait of Hormuz Traffic Collapses Again

Brent crude is near $90 a barrel as tanker transits through the Strait of Hormuz collapse and the US-Iran interim deal expires. Here’s what it means for global energy costs.

Oil prices are climbing again as one of the world’s most important energy chokepoints grinds nearly to a halt. Per IranWire, Brent crude climbed to $89.40 a barrel in Monday, August 17 trading, driven by fading hopes for renewed US-Iran talks and a sharp drop in Strait of Hormuz tanker traffic. Shipping analytics firm Kpler data cited in the same report shows only five cargo vessels transited the strait on one Saturday, with zero on Sunday — down from 31 the previous weekend.

Key Takeaways

• Brent crude climbed to $89.40 a barrel on August 17 as tanker transits through the Strait of Hormuz collapsed to near zero.
• Only five cargo vessels crossed the strait on one recent Saturday, and zero on Sunday, versus 31 the previous weekend.
• The interim US-Iran memorandum of understanding, which set a 60-day negotiating window, has expired without a permanent agreement.
• The EIA does not expect Middle East oil production to return to near pre-conflict levels until early 2027.
• Gulf producers, including Saudi Arabia, are increasingly rerouting crude through alternative loading points to bypass the strait.

The immediate trigger is the expiration of the interim framework that had briefly stabilized the situation. Per TradingEconomics, crude rose above $85 a barrel as President Trump said Washington was not currently holding or planning talks with Tehran, while confirming a naval blockade remains in place — even as he claimed the strait was open and mines cleared. The same report notes a vessel was attacked while leaving the strait, suffering engine-room damage and a crew casualty, and that the memorandum of understanding signed in June — meant to give both sides 60 days to negotiate a longer-term deal — officially expired without a follow-on agreement.

The scale of the disruption is historic. Per Al Jazeera, shipping through the strait — a conduit for about one-fifth of global oil supply before the war — has effectively collapsed since the conflict began in late February, prompting the largest energy disruption in recorded history; between eight and 15 vessels crossed on August 4-6, versus roughly 130 transits before the conflict, according to ship-tracker MarineTraffic.

Iranian Foreign Minister Abbas Araghchi has tied any reopening to conditions Washington hasn’t met, including sanctions relief and war reparations, per the same Al Jazeera report. A separate CNBC report details a restrictive draft plan Iranian state media published for strait traffic — banning US and Israeli vessels outright and penalizing others at 20% of cargo value — even as Iran and Oman continued separately negotiating a managed-transit arrangement.

The price path has been genuinely volatile rather than a one-way spike. Per a CNBC analysis, Brent fell more than 7% in one week following signals of an imminent deal that then failed to materialize, before rebounding as attacks resumed. CNBC’s most recent update notes both major contracts gained more than 5% in the most recent week following attacks on ADNOC-operated tankers in the strait and a Saudi Aramco refinery, with a Phillip Nova analyst noting prices “have now rebounded almost completely from the lows seen in early August” as hopes for a lasting resolution fade.

Gulf producers are adapting rather than absorbing the disruption passively. The same Al Jazeera reporting notes Saudi Arabia has begun offering crude sourced from outside the chokepoint, following a pattern the UAE established earlier, while the EIA’s latest outlook — cited by Yahoo Finance — does not expect Middle East oil production to return to near pre-conflict levels until early 2027, forecasting Brent to average $79 a barrel for 2026, up sharply from a pre-conflict $58 forecast.

Why It Matters

Every day the strait remains constrained adds cost to energy-importing economies across the nine markets this operation covers, most directly Pakistan, Singapore and the UK, all of which import the bulk of their energy. It also directly explains part of the Bank of England’s rate-hold calculus detailed in Article 3.

Data and Evidence

• Brent crude: $89.40/barrel (Aug 17); recent trading above $85-90 range
• Strait transits: as low as 0 vessels on some days, versus ~130/day pre-conflict
• Pre-war share of global oil flows through Hormuz: approximately one-fifth
• EIA 2026 Brent forecast: $79/barrel average, up from a pre-conflict $58 estimate

Global Impact

Beyond direct energy-import costs, prolonged Hormuz disruption raises shipping insurance premiums globally and adds to inflation risk for every economy in this nine-market portfolio — a throughline connecting this story to the UK rate story, Pakistan’s inflation outlook, and global aviation fuel costs (Article 12).

What Happens Next

Watch for whether Iran and Oman finalize a managed-transit arrangement, and whether Washington re-engages given Trump’s stated reluctance to extend the interim deal. The EIA’s early-2027 normalization timeline is the baseline scenario barring a breakthrough.

Frequently Asked Questions

Why did oil prices rise again in August?

Tanker transits through the Strait of Hormuz collapsed toward zero as the US-Iran interim deal expired without a follow-on agreement.

Is the Strait of Hormuz fully closed?

Not officially, but transit volumes have fallen to a small fraction of pre-conflict levels on many days.

When might the situation normalize?

The EIA doesn’t expect near-pre-conflict production levels until early 2027.

Are alternative routes available?

Saudi Arabia and the UAE have begun rerouting some crude through non-strait loading points. How much oil normally flows through Hormuz?

About one-fifth of global oil supply before the conflict began.