12.08.202608:41 Forex Analysis & Reviews: Sixth Day of Gains: Oil at $89.45 Amid Finally Stalled Talks on Hormuz

Brent rose 0.6 percent to $89.45 a barrel, extending gains to a sixth consecutive day — the longest winning streak since April. WTI returned to yesterday's high around $84.40 a barrel. The reason for the sustained rally remains the situation around the Strait of Hormuz, where negotiations between the US and Iran are not merely stalled but, apparently, moving in the opposite direction. Both sides have significantly hardened their positions.

Notably, the market effectively ignored a positive diplomatic signal. The Pakistani defense minister, representing one of the mediating countries in this conflict, said the US and Iran are close to some agreement. Yet prices continued to rise, indicating how skeptical traders are now of any statements claiming a deal is near. Over months of conflict, the market has already gone through several cycles of hope for a breakthrough, each ending with failed agreements, and the current reaction reflects accumulated fatigue with such signals.

The reason for the hardening of positions is concrete and well known. Trump has put forward new large-scale demands to Iran, including compensation for those killed in the conflicts, and said he will "relentlessly raise new demands at all future negotiations." Tehran, for its part, continues to insist on its own terms for the full opening of the strait — namely, an end to the US naval blockade, removal of sanctions, and compensation for military damage. Each side adds new items to the negotiating agenda, making a workable compromise increasingly unlikely in the near term.

The physical picture of shipping confirms the seriousness of the situation. About five ships pass through the strait area daily now versus roughly fourteen observed after the June memorandum of understanding. Before the war, about one-fifth of global oil and liquefied natural gas shipments transited that route, so the current traffic level indicates a persistent, significant supply deficit in the global market.

The fundamental context makes the situation potentially more explosive than current prices indicate. Global oil and gas stocks have been drawn down to critical levels over months of conflict, and the factors that previously mitigated the effects of the strait's blockade — including weak demand from China and the release of emergency reserves — have largely been exhausted. This means the safety cushion that allowed the market to endure disruptions without sharp price spikes is virtually spent, and any new escalation can now trigger a much stronger price reaction.

Since the start of the year, oil has risen nearly 45 percent, and refined fuel prices have increased even more, with diesel additionally hit by the consequences of the Russia–Ukraine war. As long as the negotiation process remains deadlocked and both sides continue to raise mutual demands, the market has no reason to price in a quick restoration of normal flows through the strait, which provides steady support for oil at current levels.

As for the current technical picture, buyers need to clear the nearest resistance at $84.40. That would allow targeting $86.60, above which a breakout will be rather difficult. The furthest target is the $89.56 area. In the event of a decline, bears will try to take control of $81.50. If they succeed, a break of that range would seriously damage bulls' positions and push oil toward a low of $78.70, with the prospect of reaching $76.30.