Kathmandu— Oil prices are climbing due to escalating tensions surrounding the Strait of Hormuz, a vital shipping lane for global oil supplies. Iranian officials have stated that the waterway will not reopen fully until the United States eases sanctions and provides war reparations, fueling market anxiety and disrupting energy markets. Shipping through the strait has significantly decreased since late February, creating the largest energy disruption in recorded history.

Strait of Hormuz Blockade

Shipping in the Strait of Hormuz, which handles approximately one-fifth of global oil supplies, has effectively ceased since conflict began. Before the recent disruptions, around 130 vessels transited the strait daily; however, between August 4th and 6th, only eight to fifteen ships passed through, according to ship-tracking platform MarineTraffic. Iran maintains its right to control shipping in the strait, despite international maritime law guaranteeing freedom of navigation, and has threatened commercial vessels attempting passage on unapproved routes.

Iranian Demands and Regional Condemnation

Iranian Minister of Foreign Affairs Abbas Araghchi stated that an agreement with Oman regarding the Strait of Hormuz is close but contingent upon US concessions. These demands include easing sanctions and providing war reparations. The United Arab Emirates condemned Iran on Saturday following a missile attack allegedly targeting a vessel owned by Abu Dhabi National Oil Company. The International Maritime Organization has recorded at least 64 violent incidents and 17 deaths involving commercial vessels in the region since the conflict began, with most attributed to Iran.

Market Reaction and Skepticism

Brent crude futures for October reached $83.77 a barrel at 2:30 GMT on Monday, representing a roughly 16 percent increase compared to prices before the recent escalation. Tim Waterer, chief market analyst at KCM Trade, noted that the lack of progress and uncertainty surrounding any potential agreement is maintaining a risk premium in oil prices. He added, “Each day that passes without a breakthrough is making traders a little more cautious.” Despite energy market volatility, Asian stock markets experienced gains on Monday morning, with indices in Japan, South Korea, and Hong Kong posting substantial increases.

Fragile Prospects for Resolution

Waterer also expressed skepticism about the speed at which a viable agreement to reopen the strait can be achieved. He cautioned that even if an agreement is reached, historical precedent suggests such understandings may prove fragile. “That residual risk of reversal would likely limit how far oil prices could fall in the event of a diplomatic breakthrough,” he said.

Negotiations between Iran and Oman continue, but a resolution remains uncertain as long as US concessions are not met, leaving global energy markets vulnerable to further disruption.

(With inputs from Al Jazeera)

Originally published on abcnews.com.np.