Oil Prices Climb Above $85 As Strait Of Hormuz Tensions Raise Global Supply Concerns

Global oil markets are facing renewed uncertainty as rising military tensions around the Strait of Hormuz continue to push crude oil prices higher. The strategically important waterway, which handles a significant share of the world’s oil exports, has once again become the center of geopolitical concerns, increasing fears of possible supply disruptions.

Brent crude, the global benchmark for oil prices, has climbed above $85 per barrel, compared with around $72 per barrel at the beginning of the month. The latest increase follows a fresh wave of maritime attacks in the region and the return of a U.S. naval blockade targeting Iranian ports. These developments have raised concerns among traders, governments, and energy companies about the stability of global oil supplies.

Energy research firm Rystad Energy has updated its assessment of the situation as diplomatic efforts continue ahead of a key August 16 deadline. According to the company, while a limited diplomatic agreement remains the single most likely outcome, the combined probability of negotiations ending in either a prolonged stalemate or renewed military conflict has increased to 55%.

Jorge León, Head of Geopolitical Analysis at Rystad Energy, said both Washington and Tehran still have strong economic reasons to avoid a complete breakdown in talks. The United States is seeking lower oil prices and a diplomatic achievement before the upcoming November midterm elections, while Iran could benefit from access to frozen financial assets and possible waivers that would allow it to increase oil exports.

However, León noted that negotiations have made little progress on the most difficult issues, including restrictions on Iran’s nuclear program and control over shipping through the Strait of Hormuz. If no meaningful agreement is reached by the August deadline, market attention is expected to shift toward whether the global shipping industry can adapt to a long-term security threat in one of the world’s busiest energy corridors.

Four Possible Scenarios

Rystad Energy has outlined four possible scenarios for how the crisis could develop, each with different implications for global oil markets and energy prices.

The first and most likely scenario is a narrow diplomatic agreement, which carries a 40% probability. Under this outcome, military attacks would gradually decline, and both sides would reach an interim agreement around August 16. The United States would slowly ease its naval blockade, allowing oil shipments through the Strait of Hormuz to recover. Oil traffic is expected to reach about 10 million barrels per day (bpd) by mid-August and stabilize at approximately 14 million bpd by October.

Even under this relatively positive scenario, oil markets would continue to include a geopolitical risk premium of $5 to $10 per barrel, as the underlying nuclear dispute would remain unresolved.

The second scenario, with a 35% probability, involves a prolonged diplomatic stalemate. In this case, neither side would make significant concessions, but both would seek to avoid a full-scale military conflict. Instead, tensions would continue through limited military actions, temporary ceasefires, and ongoing political negotiations.

Despite the uncertainty, oil shipments would slowly recover as selective U.S. enforcement measures, bilateral security arrangements, and escorted shipping convoys improve confidence. Strait of Hormuz traffic could increase from about 2.5 million bpd in August to roughly 8 million bpd by November. Under this scenario, the geopolitical risk premium would remain elevated at $10 to $15 per barrel, keeping oil prices relatively high.

The third scenario represents the worst-case outcome and has a 20% probability. If diplomatic negotiations collapse completely, direct military confrontation between the United States and Iran could intensify. Iran could attempt to block commercial shipping through the Strait of Hormuz, while the United States could strengthen its naval blockade.

Such a conflict would sharply reduce oil flows through the region, with shipping volumes falling to around 2 million bpd. Iranian crude exports could decline to only 300,000 bpd, while even alternative pipeline routes would likely experience lower volumes because of wider regional security concerns.

This scenario would create the highest geopolitical risk premium, estimated at $15 to $20 per barrel, significantly increasing global oil prices and raising fuel costs for consumers and businesses worldwide.

The fourth and least likely scenario is a comprehensive diplomatic settlement, carrying only a 5% probability. Under this outcome, both the nuclear dispute and maritime security issues would be fully resolved through a long-term agreement.

Such a breakthrough would restore confidence in regional energy supplies and reduce the geopolitical risk premium to between $0 and $2 per barrel, allowing oil prices to stabilize closer to market fundamentals.

Market Focus Remains on Regional Developments

As the August 16 deadline approaches, market participants are closely monitoring several key indicators, including the frequency of shipping attacks, the effectiveness of the U.S. naval blockade, and daily Iranian oil export volumes.

Although diplomacy remains active, growing concerns over a prolonged impasse or renewed military conflict continue to support higher crude prices. With more than half of Rystad Energy’s probability assessment now pointing toward either a stalemate or further fighting, the global oil market is expected to remain volatile in the coming weeks.

The outcome of the ongoing negotiations will play a crucial role in determining whether oil prices stabilize or continue climbing, with potential consequences for global energy markets, inflation, and fuel prices across both importing and exporting nations.