Why Oil Prices Keep Jumping Over Iran and the Strait of Hormuz
Oil prices rose for a second straight day on August 11, 2026, after talks between the United States and Iran over a peace deal and the reopening of a critical shipping route hit a wall (Firstpost). That route is the Strait of Hormuz, a narrow waterway between Iran and Oman through which about a fifth of the world's oil and gas travels. Prices jumped roughly 5% on August 10 and again on August 9, wiping out gains from earlier in August when oil had dropped on hopes that a deal was close (CNBC; Reuters).
Over the past two weeks, oil prices have been swinging back and forth like a pendulum, tracking each twist and turn in the negotiations. On August 3–4, oil fell about 5% after reports of progress in US-Iran talks made traders feel more optimistic. The benchmark price for a barrel of oil (called Brent crude) then settled at $79.45 on August 5, barely moving — up just 9 cents, or 0.11% — as investors weighed conflicting signals about whether safe shipping through the Strait could be restored (Reuters; Reuters). By August 7, Brent had climbed more than $1 a barrel on renewed uncertainty (Reuters).
The latest setback centers on a proposed deal between Iran and Oman that would end five months of war and give Iran control over which ships can enter the Gulf through the Strait (Reuters). Iranian Foreign Minister Abbas Araghchi said on August 10 that Iran and Oman were "very close" to an agreement on reopening the waterway (Al Jazeera). Iran's Foreign Ministry separately said the Strait is open to "non-hostile" ships while blocking US and Israeli vessels, and that talks with Oman over safe passage have been going on for about two months (Iran International; Iranian MFA). Iran's Foreign Ministry also said on August 9 that its talks with Oman on securing a shipping route were nearing their final stages (SBS News. Both sides have demanded compensation, and hopes for a quick reopening have faded as a result (Reuters.
The disruption at the Strait goes back to a broader conflict that escalated sharply in the spring. On April 11, US Vice President JD Vance said negotiations between the US and Iran ended without a deal after 21 hours (AP News). The next day, US Central Command said the Navy would "immediately" begin a blockade to stop ships from entering or leaving the Strait (AP News). By late April, Iran offered to end its chokehold on the Strait in exchange for the US lifting its blockade, according to two regional officials (AP News). As of mid-May, Iran still controlled the waterway while the US maintained its blockade of Iranian ports (AP News).
A tentative sign of de-escalation came in March, when Iran allowed 10 oil tankers to pass through the Strait, a gesture described at the time as showing that the US team was "dealing with the right people" (AP News). Iran and Oman later held technical talks on the Strait, announced on July 26 via Iran's Foreign Ministry website, and Iran's Foreign Ministry spokesperson addressed the Foreign Minister's visit on July 12 regarding arrangements for managing transit through the waterway (Iranian MFA; Iranian MFA).
The broader context here is a market trying to guess the outcome of a high-stakes negotiation with incomplete and sometimes contradictory information. Think of it like an insurance premium: when there's a chance something bad could happen to oil supplies, buyers pay a little extra per barrel to account for that risk. When Araghchi says a deal is "very close," that extra cost gets stripped away. When talks stall and both sides dig in over compensation and control, it gets added right back. The proposed framework giving Iran control over vessel entry goes beyond a simple reopening — it would make Iranian authority over this critical chokepoint permanent, and the Strait carries roughly a fifth of all global oil and gas shipments. For the market, the big question is not whether the Strait reopens but on what terms, and whether any agreement holds up longer than the March tanker passage did.
Iran's August 9 Foreign Ministry statement, which criticized what it called an "interventionist communiqué" from the US Secretary of State and foreign ministers, suggests diplomatic tensions are rising rather than cooling, despite Araghchi's optimistic tone (Iranian MFA. Araghchi also issued a separate statement on the presence of foreign forces in the Persian Gulf region, a theme Iran has pushed in its diplomatic messaging since at least February (Iranian MFA).
For now, the market is stuck reacting to each diplomatic headline with a 5% swing. With oil prices having already erased the early-August discount and then some, the risks are lopsided: a confirmed deal could quickly bring prices down, but a full collapse of the Oman-mediated talks would leave no near-term way to restore traffic through a waterway that remains blocked from both sides.
