Iran-US talks stall as Hormuz reopening remains uncertain, oil prices face fresh risk

By Reporter

Oil prices face renewed geopolitical risk after Iran ruled out resuming direct negotiations with the United States, leaving the reopening of the strategically vital Strait of Hormuz uncertain and threatening to revive the risk premium that had driven crude sharply higher during the latest Middle East conflict.

Iranian Foreign Minister Abbas Araghchi said Tehran would not resume direct negotiations with Washington until the United States addresses what Iran describes as violations of an earlier understanding between the two countries.

The latest diplomatic setback comes after a sharp retreat in crude prices, with Brent falling by more than $16 per barrel over eight trading sessions as hopes of de-escalation eased fears of a prolonged disruption to oil flows through Hormuz.

The developments now put the durability of that price correction under renewed scrutiny.

Araghchi said Iran was not currently engaged in direct negotiations with Washington, insisting that the United States must first address what Tehran regards as violations of the Memorandum of Understanding.

Messages, he said, were being exchanged through intermediaries, while Oman continued efforts to broker an arrangement aimed at facilitating safer maritime traffic through the Strait of Hormuz.

“As long as the American violation of the Memorandum of Understanding continues and the US does not make amends for its violations, there is no possibility of resuming negotiations,” Araghchi was cited as saying by Iranian state television.

The Iranian position contrasts with statements from US Vice President JD Vance, who indicated that Washington believed progress had been made in discussions, although he acknowledged uncertainty over whether Tehran would ultimately accept US demands.

Oman, which has played a central role in the mediation efforts, has said its discussions with Iran were progressing in a positive and constructive atmosphere and called for restraint around the strait to create room for diplomacy.

The immediate concern for the oil market is not simply whether Washington and Tehran resume talks, but whether a credible arrangement can be reached to restore predictable shipping through the Strait of Hormuz.

The waterway is one of the world’s most strategically important energy corridors, making any prolonged disruption a major risk for crude supplies, tanker movements and global energy prices.

Iran’s conditions for a broader reopening have included an end to US threats and military action, an end to the conflict, withdrawal of US naval and air forces from around Iran, compensation for war-related damages, the lifting of sanctions and the release of frozen Iranian assets.

Tehran has also rejected Washington’s characterisation of the current contacts as direct negotiations, stressing that intermediaries are carrying messages between the two sides.

The distinction is significant for oil markets because a diplomatic breakthrough could accelerate the normalisation of shipping and remove part of the geopolitical premium embedded in crude prices. Conversely, a prolonged impasse could trigger another wave of risk buying.

Recent developments have underscored that distinction. Iran and Oman have been working towards a maritime arrangement, with Tehran indicating that such an agreement could help establish shipping lanes. However, Iran has continued to insist that a broader reopening of Hormuz depends on its demands being addressed by Washington.

The uncertainty comes after crude prices staged a substantial correction from the highs reached during the conflict.

Checks in early August showed West Texas Intermediate (WTI) opening 5.24percent lower at $80.23 per barrel, while Brent fell to $83.86 per barrel, extending a sell-off that had erased much of the conflict-driven increase.

That decline reflected growing expectations that diplomatic efforts could prevent a prolonged disruption to global oil supplies.

The latest Iranian position, however, introduces a fresh layer of uncertainty.

If negotiations stall and the reopening of Hormuz is delayed, traders could once again price a larger geopolitical risk premium into crude. The impact would depend on the duration and severity of the disruption, the availability of alternative export routes and the ability of major producers to compensate for lost or delayed supplies.

For Nigeria, another sustained rise in crude prices would produce both benefits and risks.

Higher international oil prices would strengthen government revenues and potentially improve fiscal conditions, particularly because crude remains central to Nigeria’s export earnings and public finances.

Despite the recent correction, oil prices have remained above Nigeria’s 2026 budget benchmark of $64.85 per barrel. A sustained premium above the benchmark could provide additional revenue if Nigeria maintains or increases crude production.

Since the escalation of the Middle East conflict, petrol prices have risen considerably across Nigeria. Pump prices that were around N770–N800 per litre at many filling stations before the latest escalation have climbed to as high as N1,300 in some locations.

The increase has fed into transportation costs and added to inflationary pressures across the economy.

A renewed crude price rally could therefore create a policy dilemma for Nigeria: higher oil prices could strengthen government revenues while simultaneously increasing the cost pressures facing households and businesses.

For an economy still adjusting to petrol-market reforms and higher living costs, the longer the Hormuz uncertainty persists, the more complicated that trade-off becomes.

The immediate focus for the oil market is therefore shifting from the size of the recent price correction to the durability of the diplomatic progress behind it.

Until there is greater clarity on US-Iran relations and a credible framework for the safe and sustained movement of vessels through the Strait of Hormuz, the risk of another sharp move in crude prices remains firmly on the table.

Editorial note: I would use “Hormuz reopening remains uncertain” rather than “Hormuz stays uncertain” in the headline. It is more precise and gives the story a stronger market angle. Also, the latest reporting indicates that Iran and Oman are nearing a shipping arrangement, so the story should distinguish between a limited shipping arrangement and a full reopening of Hormuz.