Oil prices climbed again on September 28 as markets reassessed the chances of a durable US-Iran truce, with uncertainty over diplomacy and the security of Middle Eastern supply routes keeping traders cautious. Brent crude moved above $106 a barrel as geopolitical risks returned to focus.
Brent Crude Rises as Truce Hopes Fade
Brent crude futures rose around 1.7% to $106.14 a barrel in early Asian trading on Monday, while West Texas Intermediate crude gained about 1.2% to $93.55 a barrel. Later market data showed Brent around $106.31 and WTI near $93.48.
The latest move comes after oil prices had fallen about 2% on Friday as markets saw signs of diplomatic progress between Washington and Tehran. Brent had settled at $104.32 a barrel and WTI at $92.41. The reversal shows how quickly crude markets are responding to changes in expectations around the conflict.
For traders, the central question is no longer simply whether the United States and Iran can reach an agreement. The focus has shifted to whether any agreement would be durable enough to restore normal shipping and oil flows through the region.
US-Iran Talks Remain Central to Oil Markets
Diplomatic uncertainty has become one of the strongest drivers of crude prices. Iran has indicated that it is prepared to reopen the Strait of Hormuz if Washington reduces military pressure and lifts its blockade of Iranian ports. Iranian officials have also signalled a willingness to pursue negotiations through diplomatic channels.
At the same time, US President Donald Trump has indicated that a broader agreement with Iran could come only after the US midterm elections in November. His comments have reduced expectations for an immediate settlement and kept the market focused on the possibility of prolonged instability.
That uncertainty is important because the Strait of Hormuz is one of the world’s most important energy shipping routes. Any disruption can quickly affect expectations for the availability and transportation cost of crude.
Strait of Hormuz Remains a Key Supply Risk
The Strait of Hormuz has remained at the centre of the oil market’s risk calculations throughout the conflict.
Recent shipping data showed that crude flows through the strait had increased to about 2.9 million barrels per day over a six-day period, compared with roughly 700,000 barrels per day in August. Saudi Arabia has also increased shipments from its eastern Gulf terminals after disruptions affected alternative export routes.
Saudi Arabia has separately restarted its East-West oil pipeline following an earlier attack. The pipeline provides an alternative route for moving crude toward the Red Sea, although Reuters reported that restoring its full capacity could take several weeks because pumping stations were damaged.
The improvement in physical oil flows has provided some relief to the market. However, traders remain sensitive to any new military or diplomatic development that could threaten shipping.
Why Oil Prices Are Moving So Sharply
Oil markets react not only to actual supply shortages but also to expectations about future supply.
When traders believe a ceasefire will hold and shipping routes will reopen, the risk premium embedded in crude prices can fall quickly. That was visible last Friday, when Brent and WTI both declined as hopes for a diplomatic path increased.
When those expectations weaken, the opposite can happen. Buyers begin pricing in the possibility of longer disruptions, tighter inventories or higher transportation risks. Crude prices can therefore rise even before a measurable reduction in global supply occurs.
The current market is particularly sensitive because Brent is already trading around $106 a barrel. That leaves energy-intensive economies and industries exposed to another period of elevated input costs if geopolitical tensions remain unresolved.
Saudi Oil Flows Provide Some Relief
The supply picture is not entirely negative.
Saudi Arabia has increased exports from its Gulf terminals following attacks that disrupted its East-West pipeline and affected shipments through the Red Sea. Reuters reported that Saudi Aramco loaded around 14 million barrels of crude onto seven very large crude carriers at Ras Tanura on September 20.
The kingdom has also restarted its East-West pipeline, although it is initially operating below its full capacity. The pipeline has historically provided Saudi Arabia with a way to move crude toward the Red Sea without relying entirely on the Strait of Hormuz.
These additional flows can reduce some of the immediate pressure on global supply. But they do not eliminate geopolitical risk because traders continue to assess whether shipping through the Gulf can remain stable.
Markets Watch for More Than the Truce
Oil traders are also tracking developments beyond the direct US-Iran negotiations.
Attacks by Houthi fighters on Saudi Arabia have raised additional concerns about regional supply security. Reuters reported last week that attacks were contributing to uncertainty even as diplomatic efforts between Washington and Tehran showed signs of progress.
The broader Middle East security situation therefore remains an important variable for crude prices.
Russia-Ukraine developments are also relevant because disruptions to other major energy supply chains can compound pressure in global oil and refined-product markets. Traders are consequently watching several potential sources of supply disruption at the same time.
This helps explain why oil prices have remained volatile despite periods of diplomatic optimism.
India Faces Higher Energy and Inflation Risks
Higher crude prices are particularly important for India because the country relies heavily on imported oil.
A sustained rise in international crude prices can increase India’s import bill and put pressure on the rupee. It can also raise costs for sectors that depend heavily on fuel, transportation and petrochemical inputs.
The impact can extend into inflation if higher energy costs feed into transportation and production expenses.
Indian financial markets have already reacted to the renewed oil pressure. On September 28, the Sensex fell sharply in morning trading as rising crude prices, foreign selling and higher global bond yields weighed on investor sentiment.
For Indian businesses, the direction of crude prices is therefore closely linked to currency conditions, input costs and expectations around domestic inflation.
Central Banks Are Also Watching Crude Prices
Oil prices matter for monetary policy because energy costs can influence headline inflation.
A prolonged period of crude prices above $100 a barrel could complicate the policy decisions facing central banks, particularly if higher energy costs begin affecting broader prices.
In the United States, markets are already monitoring inflation and interest-rate expectations closely. Higher oil prices can strengthen concerns about future inflation and potentially keep monetary policy tighter for longer.
That relationship can also affect global equity markets. Higher interest rates generally increase financing costs and can change how investors value companies whose earnings are expected further in the future.
As a result, an oil-market shock can spread beyond energy companies into currencies, bonds and stock markets.
What Happens Next for Oil Prices
The next major move in crude prices will depend heavily on whether diplomatic efforts produce a credible and lasting reduction in supply risks.
A meaningful agreement that allows the Strait of Hormuz to operate normally could remove part of the geopolitical premium currently embedded in crude prices. Previous periods of stronger ceasefire expectations have shown how quickly oil can respond when traders expect supply conditions to improve.
On the other hand, renewed military action, further attacks on energy infrastructure or a prolonged breakdown in negotiations could push prices higher.
The market is therefore balancing two competing forces: improving physical oil flows on one side and continuing geopolitical uncertainty on the other.
For now, the return of Brent above $106 highlights how quickly crude markets can change when expectations around the US-Iran conflict shift.
Key Takeaways
- Brent crude rose above $106 a barrel on September 28 as US-Iran diplomatic uncertainty returned to focus.
- Iran has indicated it could reopen the Strait of Hormuz under conditions involving reduced US military pressure and an easing of restrictions.
- Saudi Arabia has increased Gulf oil shipments and restarted its East-West pipeline, providing some additional supply flexibility.
- Higher crude prices remain a concern for oil-importing economies such as India because of potential effects on inflation, currency markets and business costs.
FAQ
Why did oil prices rise on September 28?
Oil prices rose as markets reassessed the prospects for a lasting US-Iran agreement. Uncertainty over negotiations and continued risks to Middle Eastern shipping increased concerns about future supply security.
What is the Strait of Hormuz?
The Strait of Hormuz is a strategically important waterway connecting the Persian Gulf with the Gulf of Oman and the Arabian Sea. It is a major route for international oil shipments, making its security important to global energy markets.
How does the US-Iran conflict affect crude prices?
The conflict affects crude prices mainly through supply and shipping risks. Any threat to oil production, exports or transportation routes can cause traders to price in tighter future supply, while credible diplomatic progress can reduce those risk premiums.
Why is higher crude oil important for India?
India imports a large amount of its crude oil. Higher international prices can increase the country’s import bill, pressure the rupee and raise costs across fuel-dependent industries. If elevated prices persist, they can also complicate the inflation outlook.
