Brent crude prices moved close to $85 a barrel on August 10, as uncertainty surrounding the Strait of Hormuz continued to keep energy markets on edge. Investors are weighing hopes for an Iran-Oman arrangement to establish shipping routes through the strategic waterway against Tehran’s warning that an agreement with Oman would not automatically mean a full reopening of the strait.
The latest move highlights how sensitive global oil prices remain to developments around Hormuz, a critical energy chokepoint. Any credible agreement that restores regular tanker traffic could push prices lower, while continued restrictions or fresh attacks could keep crude elevated and volatile.
Brent crude approaches $85
Brent crude, the global benchmark, was trading around $85 per barrel as markets reacted to the latest developments involving Iran, Oman and the Strait of Hormuz. Oil had already moved sharply in recent sessions as traders repeatedly adjusted expectations over whether the waterway would reopen.
The latest price movement reflects a clash between two opposing forces:
| Oil-market factor | Impact on Brent |
|---|---|
| Hopes for an Iran-Oman shipping arrangement | Downward pressure |
| Uncertainty over full Hormuz reopening | Upward pressure |
| Continuing regional attacks | Upward pressure |
| Risk of disrupted tanker traffic | Upward pressure |
| Potential restoration of exports | Downward pressure |
| Tight regional supply | Upward pressure |
This has left crude prices highly sensitive to every statement from Tehran, Washington and regional governments.
Iran-Oman talks are at the centre of the market
Iran has indicated that it is close to an arrangement with Oman aimed at establishing alternative shipping lanes through the Strait of Hormuz.
The proposed arrangement could provide a controlled route for vessels while wider negotiations continue.
However, Tehran has also made clear that an agreement with Oman should not automatically be interpreted as a complete reopening of the waterway. That distinction has become crucial for oil traders.
The key difference
Iran-Oman agreement
↓
Alternative shipping corridor
↓
Some vessels may transit
↓
BUT
↓
Full Hormuz reopening not guaranteed
↓
Oil supply uncertainty remains
Markets therefore cannot treat the latest diplomatic progress as equivalent to a full restoration of normal shipping.
Why the Strait of Hormuz matters so much
The Strait of Hormuz connects the Persian Gulf with the Gulf of Oman and the wider Indian Ocean.
It is one of the world’s most important energy chokepoints because a huge volume of crude oil, petroleum products and liquefied natural gas normally passes through the narrow waterway.
Estimates commonly put the share of global oil flows passing through Hormuz at roughly one-fifth of world oil consumption.
That makes any sustained disruption capable of affecting:
- Crude oil prices
- Petrol and diesel prices
- Aviation fuel
- Shipping costs
- Inflation
- Refinery margins
- Global trade
- Energy-importing economies
Hormuz’s importance
Persian Gulf producers
│
▼
Strait of Hormuz
│
▼
Gulf of Oman
│
▼
Indian Ocean
│
┌──────┼────────┐
▼ ▼ ▼
Asia Europe Global
markets markets trade
The concentration of energy flows through one narrow maritime route is what makes the market particularly vulnerable to disruption.
Why oil prices remain volatile
Oil traders are currently dealing with two competing scenarios.
Scenario 1: Hormuz gradually reopens
If Iran, Oman and other parties reach an arrangement that allows tanker traffic to return toward normal levels, concerns about supply shortages could ease.
That could trigger a decline in Brent prices as traders remove some of the geopolitical risk premium.
Diplomatic agreement
↓
Shipping resumes
↓
Oil supply improves
↓
Supply fears ease
↓
Brent falls
Scenario 2: Reopening talks fail
If negotiations break down or shipping remains severely restricted, traders could price in a longer period of supply disruption.
That would keep pressure on inventories and potentially push Brent higher.
Talks fail
↓
Hormuz remains restricted
↓
Tanker traffic disrupted
↓
Supply tightens
↓
Inventory drawdown
↓
Brent remains elevated
This explains why oil prices have been moving sharply even when the underlying supply situation has not changed dramatically from one day to the next.
Oil prices have already experienced major swings
The current $85 level needs to be viewed against the extraordinary volatility seen since the Hormuz crisis began.
Brent had previously surged toward $120 a barrel during the most intense phase of the disruption before falling as markets began pricing in potential diplomatic progress.
More recently, oil prices fell sharply after US President Donald Trump announced that planned strikes on Iran had been suspended and indicated that a Hormuz arrangement had been reached.
The subsequent reversal demonstrates how quickly crude can respond to geopolitical headlines.
Brent’s recent volatility
| Market development | Brent reaction |
|---|---|
| Severe Hormuz disruption | Prices surged |
| Supply concerns intensified | Brent moved toward $120 |
| Hopes for diplomatic progress | Prices declined |
| Uncertainty over reopening | Prices rebounded |
| Iran’s latest conditions | Brent approached $85 |
The market is effectively pricing the probability of a normal shipping environment rather than simply today’s physical supply.
Iran’s position is crucial
Iran controls the northern side of the Strait of Hormuz and has significant influence over maritime traffic in the area.
Tehran’s latest messaging suggests that the country is prepared to discuss arrangements that facilitate shipping, but it wants broader conditions addressed before accepting a complete reopening.
That has created a gap between optimistic statements about the talks and the actual operational status of the waterway.
For oil traders, that gap represents risk.
Oman is playing a key diplomatic role
Oman has emerged as an important intermediary in the discussions.
The country’s geographic position makes it particularly relevant to any alternative maritime arrangement because Omani territory lies along the southern side of the Strait of Hormuz.
An Iran-Oman navigation arrangement could potentially provide a controlled mechanism for ships to pass through the area while reducing the risk of direct confrontation.
However, the success of such an arrangement would depend on whether shipping companies and insurers consider the route sufficiently safe.
Why shipping companies matter
Iran + Oman agreement
↓
Government permission
↓
Shipping companies assess risk
↓
Insurers assess risk
↓
Tanker operators decide
↓
Actual shipping resumes
A diplomatic agreement alone therefore does not guarantee an immediate return to normal oil flows.
Insurance and shipping costs remain important
Even if a shipping corridor becomes available, tanker operators may continue demanding higher insurance premiums because of the security risks in the region.
Higher insurance and freight costs can raise the delivered price of crude even if the headline Brent price falls.
This is one reason the reopening of Hormuz may not immediately restore the global oil market to pre-crisis conditions.
What happens to global oil supply?
The longer the disruption lasts, the more important alternative supply sources become.
Producers outside the Gulf region can increase exports where spare capacity and infrastructure allow.
Strategic petroleum reserves can also be used to reduce the immediate impact of supply disruptions.
But these measures cannot completely replace the enormous volumes normally transported through Hormuz indefinitely.
Supply response
| Response | Short-term effect |
|---|---|
| Alternative shipping routes | Reduces some disruption |
| Higher production elsewhere | Adds supply |
| Strategic reserves | Provides temporary buffer |
| Demand reduction | Reduces pressure |
| Hormuz reopening | Most effective solution |
The market therefore continues to focus heavily on whether normal tanker traffic can return.
India faces particular risks from higher crude prices
India is one of the world’s major oil importers, making global crude prices particularly important for the domestic economy.
Higher Brent prices can eventually affect:
- Petrol and diesel prices
- Aviation turbine fuel
- Transport costs
- Logistics
- Fertiliser costs
- Manufacturing
- Inflation
- The current-account balance
- The rupee
India’s proximity to the Gulf region and its substantial dependence on imported crude make the Hormuz situation especially important.
Oil-price transmission to India
Brent crude rises
↓
India's import bill rises
↓
Trade deficit pressure
↓
Rupee pressure
↓
Higher input costs
↓
Inflationary pressure
The impact on consumers is not necessarily immediate because domestic fuel prices depend on refinery economics, taxes, exchange rates and government policy as well.
Airlines are another vulnerable sector
Jet fuel prices tend to respond to movements in global crude and refined-product markets.
A prolonged supply disruption could therefore increase costs for airlines.
Higher aviation fuel costs can result in:
- Higher airline operating expenses
- Pressure on ticket prices
- Lower margins
- Increased fuel surcharges
- Greater financial pressure on weaker carriers
The impact would be particularly important if the Hormuz disruption persists for months rather than days.
Inflation is the bigger macroeconomic risk
The oil market’s importance extends beyond fuel.
Crude oil is an input into a large part of the global economy.
Higher energy prices can increase the cost of:
- Transportation
- Manufacturing
- Chemicals
- Plastics
- Packaging
- Agriculture
- Aviation
- Electricity generation
That creates a second-round inflation effect.
Higher oil prices
↓
Higher fuel costs
↓
Higher transportation costs
↓
Higher production costs
↓
Higher consumer prices
↓
Inflation
Central banks therefore watch sustained oil-price increases closely.
The market is watching Washington as well
The Iran-Oman discussions are not occurring in isolation.
The United States remains a key participant in the broader geopolitical dispute and has previously signalled strong interest in restoring unrestricted shipping through Hormuz.
This means any change in US-Iran relations could quickly affect oil prices.
A diplomatic breakthrough could cause Brent to fall sharply.
Conversely, renewed military escalation could send prices higher.
Oil traders are pricing uncertainty
The current market environment can be described as a geopolitical risk premium.
When traders fear that future oil supplies could be disrupted, they are willing to pay more for crude today.
If that risk disappears, the premium can unwind quickly.
What drives the premium?
| Factor | Current market concern |
|---|---|
| Hormuz | Shipping restrictions |
| Iran | Conditions for reopening |
| Oman | Mediation and shipping corridor |
| US | Diplomatic and military policy |
| Tankers | Safety and insurance |
| Producers | Ability to increase supply |
| Inventories | Buffer against disruption |
This explains why crude can move several dollars in response to a single diplomatic statement.
What could push Brent above $90?
Several developments could send oil prices higher again.
1. Hormuz remains closed
A prolonged disruption would increase supply concerns.
2. Talks collapse
If Iran and Oman fail to reach an operational arrangement, markets could remove the expectation of near-term normalisation.
3. Fresh attacks
Attacks on tankers or energy infrastructure could dramatically increase the risk premium.
4. Production losses
If Gulf producers are forced to reduce output, the supply shock would become more severe.
5. Falling inventories
If countries begin drawing down oil stocks rapidly, traders could become increasingly concerned about physical shortages.
Escalation
+
Shipping disruption
+
Production losses
+
Inventory drawdown
↓
Higher supply risk
↓
Brent potentially > $90
What could push Brent back below $80?
The opposite scenario is also possible.
If Iran and Oman establish a reliable shipping mechanism and the United States accepts the arrangement, tanker traffic could gradually return.
Additional production from other oil producers could further ease supply pressure.
Hormuz agreement
+
Safe tanker passage
+
Higher production
+
Stable inventories
↓
Lower supply risk
↓
Risk premium disappears
↓
Brent potentially < $80
Earlier forecasts from UOB Global Economics & Markets Research had a base-case scenario for Brent around $85 in Q3 2026 and $80 in Q4, assuming supply pressure gradually eases.
Three possible oil-price scenarios
| Scenario | Hormuz situation | Possible Brent direction |
|---|---|---|
| Bullish for oil | Prolonged disruption/escalation | Above $90 |
| Base case | Gradual reopening | Around $80-$85 |
| Bearish for oil | Full reopening + supply recovery | Below $80 |
These are scenario ranges rather than precise forecasts. Geopolitical developments can move prices outside them very quickly.
Why $85 is an important level
Brent near $85 represents a significant increase from the levels seen when markets were more optimistic about a rapid resolution.
It also places crude above the levels that many forecasters had expected for much of the year before the Hormuz crisis intensified.
For consumers, every sustained $10 increase in crude can have meaningful effects on fuel costs and inflation.
For oil producers, however, higher prices can improve revenues and profitability.
Winners and losers from higher oil
| Potential beneficiaries | Potentially affected |
|---|---|
| Oil producers | Oil-importing countries |
| Upstream companies | Airlines |
| Oilfield services | Transport companies |
| Energy exporters | Refiners with weak margins |
| Alternative-energy producers | Consumers |
The distributional impact therefore varies considerably across the economy.
The key question: temporary spike or prolonged shock?
This is the central issue for investors.
If the current price increase is driven primarily by temporary geopolitical uncertainty, Brent could fall rapidly once shipping normalises.
But if the crisis causes prolonged physical supply losses, the market could remain tight for much longer.
The difference between these two scenarios is enormous.
TEMPORARY SHOCK
Hormuz disruption
↓
Prices rise
↓
Diplomatic deal
↓
Shipping resumes
↓
Prices fall
PROLONGED SHOCK
Hormuz disruption
↓
Production losses
↓
Inventory decline
↓
Higher freight costs
↓
Persistent supply shortage
↓
Oil stays high
Key oil-market numbers
| Indicator | Latest/important figure |
|---|---|
| Brent crude | Near $85/barrel |
| Earlier crisis peak | Near $120/barrel |
| UOB Q3 2026 base-case forecast | ~$85/barrel |
| UOB Q4 2026 forecast | ~$80/barrel |
| Hormuz share of global oil flows | ~20% |
| Main diplomatic channel | Iran-Oman talks |
| Key market uncertainty | Full vs partial reopening |
What investors should watch next
The next major market-moving signals are likely to come from the actual implementation of any Iran-Oman shipping arrangement.
Investors should watch:
- Whether tankers begin transiting regularly
- Whether insurance companies cover the route
- Whether the US accepts the proposed arrangement
- Iranian conditions for a full reopening
- Any attacks on ships
- Gulf oil-production levels
- Global inventory data
- Brent futures structure
- Refinery margins
The physical movement of tankers will ultimately matter more than diplomatic headlines.
Conclusion
Brent crude hovering around $85 a barrel reflects the market’s uncertainty over whether the Strait of Hormuz is genuinely moving toward reopening or merely toward a limited shipping arrangement.
Iran and Oman are working toward an arrangement that could establish alternative shipping lanes, but Tehran has indicated that such an agreement would not necessarily amount to a full reopening of the strategic waterway. That distinction is keeping the geopolitical risk premium in crude prices.
For oil markets, the next phase will depend less on announcements and more on whether tankers can safely and consistently move through the region.
If shipping normalises, Brent could retreat toward the $80-$85 range and potentially lower as the risk premium disappears. If negotiations fail or attacks and supply disruptions continue, prices could move back above $90.
For India and other major oil importers, the stakes are particularly high. A prolonged period of crude above $85 could increase import costs, put pressure on currencies and raise inflation risks.
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