Oil prices rebounded on Tuesday after a sharp sell-off in the previous session, as uncertainty surrounding negotiations to end the United States-Iran war renewed concerns over potential supply disruptions in the Middle East.
By 3:00 pm AEST (5:00 am GMT), Brent crude futures had risen $1.28, or 1.5%, to US$85.05 a barrel, while U.S. West Texas Intermediate (WTI) crude gained $0.91, or 1.1%, to US$81.25 a barrel.
Oil prices had fallen on Monday after U.S. President Donald Trump said he was delaying further military action against Iran while talks continued to end the conflict and resolve disputes over the Strait of Hormuz.
However, Iran's Foreign Ministry spokesman Esmail Baghaei rejected Trump's claims on Monday, saying no negotiations with the United States were taking place and no meetings had been scheduled.
ING commodities strategists said in The Commodities Feed that the previous session's sell-off appeared excessive given the uncertainty surrounding the situation.
"The scale of the sell-off seems fairly overdone, given that there’s still considerable uncertainty. We’ve been in this situation multiple times before, only to see things unravel. And with Iran denying that any talks are underway and Trump issuing warnings if no deal materialises, the backdrop clearly leaves ample room for a renewed escalation."
The dispute over the Strait of Hormuz remains a key obstacle in negotiations. Washington says a memorandum of understanding agreed in June requires Iran to reopen the waterway, while Tehran argues the agreement preserves its authority over the strategic shipping route.
In the Red Sea, Reuters reported that six Saudi-flagged supertankers recently changed course in the Gulf of Aden towards southern Africa, while two tankers carrying Saudi crude successfully crossed the Bab el-Mandeb Strait, citing shipping data.
Shipping traffic through both the Bab el-Mandeb Strait and the Strait of Hormuz remained largely unchanged at the start of the week.
However, risks to vessels in the Strait of Hormuz persist. On Tuesday, the United Kingdom Maritime Trade Operations (UKMTO) agency reported an incident about 20 nautical miles (37 kilometres) northeast of Oman's Al Khasab after a cargo vessel broadcast on VHF channel 16 that it had been struck by an unknown projectile.
