Oil prices traded in a narrow range on Monday after posting strong gains last week, as ongoing uncertainty surrounding U.S.-Iran relations and the Strait of Hormuz continued to support crude markets.
Brent crude futures edged 0.1% higher to $88.62 per barrel, while West Texas Intermediate futures slipped 0.1% to $81.37 per barrel.
Oil Prices Remain Supported by Iran Tensions
Brent crude gained more than 5% last week as tensions between the United States and Iran intensified.
Iranian attacks on energy infrastructure across West Asia added to concerns about supply disruptions, while shipping activity through the Strait of Hormuz slowed further following attacks on tankers in the region.
The United States also maintained pressure on Tehran, keeping geopolitical risk elevated across global energy markets.
Strait of Hormuz Remains a Key Supply Risk
The Strait of Hormuz continues to be one of the main concerns for oil traders because of its importance to global crude shipments.
Any prolonged disruption to tanker traffic through the waterway could tighten supply conditions and push energy prices higher.
Over the weekend, Iranian Foreign Minister Abbas Araqchi repeated that Tehran was not currently engaged in direct negotiations with Washington.
At the same time, U.S. officials warned that additional economic measures against Iran could be introduced.
Red Sea Conflict Adds Further Pressure
Tensions have also expanded into the Red Sea.
Yemen’s Iran-backed Houthi movement continued attacks on vessels near the Bab al-Mandab Strait, another important shipping route for global trade and energy flows.
The additional security risks have increased concerns that oil transportation routes across the region could face further disruption.
This has helped keep crude prices supported despite weaker forecasts for global oil demand.
OPEC and IEA Cut Oil Demand Forecasts
Supply concerns have so far outweighed signs of softer demand.
Both the Organization of the Petroleum Exporting Countries and the International Energy Agency recently lowered their oil demand forecasts for 2026.
Normally, weaker demand projections would put downward pressure on crude prices.
However, the risk of supply disruptions in the Middle East has kept traders focused more heavily on potential shortages than on slower consumption growth.
Diesel Supply Emerges as Major Concern
Analysts at ANZ said refined petroleum products have been hit harder by the regional conflict than the broader crude oil market.
Diesel has emerged as one of the most vulnerable parts of the energy complex.
Supplies have been affected by a combination of refinery outages, shipping disruptions and reduced production.
ANZ analysts noted that refinery problems across the Persian Gulf have limited diesel output and exports while global demand for the fuel remains relatively strong.
Russia-Ukraine Conflict Adds to Supply Risks
Pressure on refined fuel markets has also been intensified by the ongoing conflict between Russia and Ukraine.
Ukrainian attacks on Russian oil infrastructure have added another layer of uncertainty to global energy supply chains.
This combination of Middle East disruptions, refinery outages and attacks on energy facilities elsewhere could keep diesel and other refined fuel markets tight in the months ahead.
Oil Market Outlook Remains Tied to Geopolitical Risk
The near-term outlook for oil prices remains heavily dependent on developments involving Iran, the Strait of Hormuz and regional shipping routes.
Any escalation that further restricts crude or refined-product exports could provide additional support for Brent and WTI prices.
On the other hand, a diplomatic breakthrough or improvement in shipping conditions could reduce the geopolitical premium currently built into crude markets.
For now, oil prices remain elevated after last week’s strong rally, with investors closely watching developments across the Middle East for the next major catalyst.
