Oil prices hovered close to $110 per barrel on Tuesday morning as traders evaluated prospects for peace talks in the Middle East. The US is reviewing a new proposal from Iran while the vital Strait of Hormuz remains largely blocked.
Brent, the benchmark for two-thirds of the world's oil, climbed 1 per cent to $109.30 a barrel at 7.26am UAE time. West Texas Intermediate, the gauge that tracks US crude, was also up nearly 1 per cent to $97.28 per barrel.
Vandana Hari, chief executive of Singapore-based Vanda Insights, said US President Donald Trump is “sceptical of Iran's offer to end the Strait of Hormuz blockade but postpone nuclear talks”. Insurers have tightened requirements for ships in the strait, she added.
Crude prices have swung wildly in recent days. Goldman Sachs warned on Monday that oil prices could approach $120 a barrel later this year amid a continued stalemate in peace talks between the US and Iran, which leaves Gulf shipments uncertain for longer.
The global investment bank raised its oil price forecasts for the fourth quarter of 2026, lifting its Brent crude target to $90 per barrel and WTI to $83 per barrel, warning that massive Middle East production losses are driving global oil inventories lower.
“The economic risks are larger than our crude base case alone suggests because of the net upside risks to oil prices, unusually high refined product prices, products shortages risks, and the unprecedented scale of the shock,” Goldman Sachs analysts led by Daan Struyven said in a research note.
The Strait of Hormuz, through which roughly a fifth of global oil and gas supplies normally pass, has become a central issue in US-Iran negotiations, alongside restrictions on Tehran’s nuclear programme, after Iran’s effective blockade of tankers sent global energy prices sharply higher.
Iran blocked the strait when the war began on February 28, while the US has blockaded Iranian ports in return. It has led to an impasse. Tehran has said it wants to impose transit fees as part of any lasting peace deal.
In an interview with Fox News, US Secretary of State Marco Rubio said the US will not accept Iran retaining control over the strait or imposing tolls on shipping.
The future of the waterway, through which roughly a fifth of global oil and gas supplies normally pass, has now become a central issue in US-Iran negotiations, alongside restrictions on Tehran’s nuclear programme, after Iran’s effective blockade of tankers sent global energy prices sharply higher.
Major producers, including the UAE, Saudi Arabia, Bahrain, Iraq and Kuwait, rely on the strait to export energy, while Iran borders its northern shore, giving it strategic influence over traffic.
Meanwhile, crude oil production shut-ins in the Middle East, particularly in Saudi Arabia, Iraq and Kuwait, have reduced associated natural gas production, the International Energy Agency said in its quarterly report.
The region accounts for almost 30 per cent of global oil output and 18 per cent of gas production, estimates from the Paris-based IEA show.
“The impact of higher oil prices [on gas production] is expected to become more pronounced in the latter part of the year,” analysts at the IEA wrote.
