By Arjavi Indraneesh
Efforts to end the U. S.-Iran conflict have stalled again, leaving the Strait of Hormuz largely closed to normal commercial traffic and deepening uncertainty over Gulf energy exports. Fresh shipping attacks and weakening forecasts for global oil consumption are adding another layer of risk to an already volatile market.
Iran and the United States remain far apart over restoring the interim agreement reached in June, which had called for an immediate end to military operations and opened a 60-day period for negotiations towards a permanent settlement. The arrangement quickly unravelled. President Donald Trump declared it over on July 7, while Tehran formally suspended it about a week later.
Negotiations through intermediaries have produced no progress on either restoring the agreement or establishing a timetable for implementing its commitments. Tehran maintains that Washington breached the arrangement shortly after it was reached and therefore rejects suggestions that the original negotiating period can simply be extended.
The dispute centres partly on Hormuz, the narrow waterway linking the Gulf to the Arabian Sea. Before the conflict, roughly a fifth of global oil and liquefied natural gas flows passed through the strait. Washington says Tehran failed to meet commitments to reopen the route. Iran says the United States has not fulfilled obligations involving the blockade of Iranian ports and the release of frozen assets.
Trump has meanwhile hardened his rhetoric, asserting that the United States has “total control” of Hormuz and describing Iran as weakened by the conflict. Iranian authorities dispute that claim and insist the waterway will remain blocked until their conditions are accepted. Tehran has demanded access to frozen assets and broader changes to U. S. policy in the region.
The diplomatic impasse has been accompanied by renewed danger for commercial shipping. A suspected Houthi attack on the Egyptian-owned cargo vessel Tihamah in the Bab el-Mandeb Strait on Tuesday killed four crew members. Two Yemeni rescuers were also reported killed. In a separate incident, a U. S. Navy helicopter fired Hellfire missiles at a Panama-flagged cargo vessel after it allegedly ignored orders linked to the blockade of Iranian ports.
The incidents underlined the vulnerability of two critical maritime chokepoints at opposite ends of the Arabian Peninsula. Hormuz carries a substantial share of Gulf energy exports, while Bab el-Mandeb connects Red Sea shipping with the Gulf of Aden and the wider Indian Ocean. Restrictions affecting both routes are forcing operators to reassess insurance, routing and security costs.
Oil prices have consequently remained highly sensitive to diplomatic and military developments. Brent crude settled near $89 a barrel after Tuesday’s attacks, while West Texas Intermediate ended around $83. Benchmark prices have swung sharply since fighting began in February, with Brent reaching $126 at one stage as traders priced in the possibility of prolonged disruption to Gulf exports.
Supply risks are increasingly colliding with a weaker demand picture. OPEC has cut its estimate for global oil demand growth in 2026 for a fourth consecutive month, reducing the projection to 580,000 barrels per day. The group remains more optimistic than other forecasters and expects stronger consumption growth next year.
The International Energy Agency has moved in the opposite direction more sharply. It now expects global oil demand to fall by 1.6 million barrels per day this year, worsening its previous estimate by about 510,000 barrels per day. The agency sees the continuing Hormuz closure, elevated fuel prices and disrupted supply chains depressing consumption, particularly across Asia. Global supply is projected to decline by 4.3 million barrels per day during 2026.
Inventories have provided another bearish signal. U. S. commercial crude stocks jumped by 17.4 million barrels in the week ended August 7 to 424.4 million barrels, the largest weekly increase since January 2023. The rise contrasted sharply with expectations for a draw and reflected a steep fall in exports alongside higher imports. Crude exports dropped to 3.06 million barrels per day, their lowest level since November 2025. (IPA Service)
