Oil prices in the U.S. climbed above $80 a barrel on Monday, fueled by increasing concerns about a potential deal to reopen the Strait of Hormuz, as reserves hit their lowest point since 1983.
West Texas Intermediate crude saw a 5.1% increase, settling at $82.13 per barrel, while Brent crude went up by 5% to reach $87.72.
Investor expectations for a swift agreement between the U.S. and Iran regarding tanker traffic in the Persian Gulf took a hit after Trump’s remarks over the weekend. He seemed to indicate a longer wait, applying economic pressure on Iran instead.
The U.S. Department of Energy’s announcement on Monday revealed that the Strategic Petroleum Reserve (SPR) has dipped below 300 million barrels, marking the lowest level in over 40 years amid energy supply issues caused by the conflict in Iran.
Trump referred to the negotiations with Tehran as “being modest” during a call on Sunday, highlighting Iran’s significant inflation and financial struggles.
Since the onset of the Iran war on February 28, oil prices have surged to as much as $125 per barrel, although the U.S. is somewhat shielded due to its oil reserves.
The decline in oil supplies raises the possibility of further increases in gasoline prices unless maritime traffic in the region normalizes soon.
As of Monday, the national average price for gasoline remained stubbornly above $4 per gallon, which is over $1 higher than pre-war levels, according to AAA.
The Dow Jones Industrial Average was down 151 points, representing a 0.3% decline, around 2:20 p.m. ET, with both the S&P 500 and Nasdaq following suit, down 0.1% and less than 0.4%, respectively.
There’s hope among investors for a lasting agreement between the U.S. and Iran regarding the Strait of Hormuz, following Trump’s decision last week to call off a planned military response and affirm that discussions were ongoing.
Treasury Secretary Scott Bessent mentioned recently that an agreement to restore “freedom of movement” through the Strait could be on the horizon.
But so far, this has not materialized, as Iran has outlined a long list of conditions.
Iran’s Foreign Ministry spokesperson Esmail Bacaei stated on Monday that the U.S. must lift its naval blockade before any agreement on reopening shipping lanes could proceed.
Bacaei emphasized that the necessary conditions to reopen the Strait of Hormuz are nonexistent as long as the blockade is in place.
This past weekend, Iran put forth demands including the lifting of U.S. sanctions, compensation for war damages, the release of frozen assets, and a cessation of planned military actions against them.
Notably, a prior memorandum of understanding between the United States and Iran to reopen the strait was short-lived; it unraveled swiftly when Tehran started attacking tankers using an alternative route.
The U.S. responded with airstrikes and reinstituted a naval blockade.
The SPR, which stood at around 415 million barrels prior to the conflict in the Middle East, fell to 298.7 million barrels last week, largely due to the depletion of tens of millions of barrels to support supplies during events like the Russia-Ukraine war.
The U.S. Government Accountability Office has released concerns about the functionality of emergency energy reserves, with aging infrastructure in jeopardy.
In March, the International Energy Agency approved the unprecedented release of 400 million barrels of oil to bolster global supplies.
White House officials have repeatedly asserted that oil and gasoline prices are likely to drop swiftly once the conflict comes to an end.
