Oil prices increased by more than $3 today, a day after President Donald Trump said Iran's response to a US peace proposal was "unacceptable", leaving the Strait of Hormuz largely closed with no clear end in sight to the war.
Brent crude futures were up $2.39, or 2.36%, at $103.68 a barrel at 3pm GMT. US West Texas Intermediate was at $97.49 a barrel, up $2.07, or 2.17%.
Earlier in the session, the contracts reached highs of $106 and $100, respectively.
Last week, both contracts recorded 6% weekly losses on hopes for an imminent end to the 10-week-old conflict that would allow oil transit through the Strait of Hormuz.
"Despite reassuring noises that back channels are still open and the parties are talking, our take is that the U.S. and Iran are as far away from agreement as when this supposed ceasefire started," PVM Oil Associates analyst John Evans said. "We do not see anything changing before Donald Trump visits China and asks for Beijing's aid in pressuring Iran."
Trump is scheduled to arrive in Beijing on Wednesday and is expected to discuss Iran among other topics with Chinese President Xi Jinping, according to US officials.
The world has lost about 1 billion barrels of oil over the past two months and energy markets will take time to stabilize even if flows resume, Saudi Aramco CEO Amin Nasser said over the weekend.
Saudi Arabian crude oil exports to China are expected to fall further in June after buyers cut nominations because of costly prices linked to the US-Iran conflict and lower supplies, trade sources told Reuters.
Meanwhile, three tankers carrying crude exited the Strait last week and yesterday with trackers switched off to avoid Iranian attacks, Kpler shipping data showed. One was loaded with Iraqi crude and bound for Vietnam.
A second Qatari liquefied natural gas tanker is transiting the strait as well, heading northeast toward Port Qasim in Pakistan, where it is expected to arrive on May 12, according to LSEG shipping data.
Japan's industry ministry said a tanker carrying Azerbaijani crude oil was set to arrive as early as tomorrow, the first cargo of oil received from Central Asia since the Iran war began.
JPMorgan analysts expect oil prices to remain in the low $100s for most of the rest of this year, averaging $97 for 2026 and highlighting that there would not be a quick normalization once the Strait of Hormuz reopens.
In an attempt to hedge prices and ensure revenue, US producer Diamondback Energy bought options to sell the price difference between US West Texas Intermediate crude and Brent at around minus $42 a barrel in the coming months, a bet that could pay off if the US banned oil exports.
This would lead to a rise in domestic inventory as US refiners typically process less domestic crude than is produced in the country and would push down WTI prices and widen its discount to Brent.
