Crude oil prices climbed sharply Monday as Iran and the United States rejected any extension of the memorandum of understanding designed to halt their conflict.
The breakdown revived fears of wider military escalation and prolonged disruption in the Strait of Hormuz.
Brent crude, the global oil benchmark, advanced 2.7 percent to settle at $90.87 per barrel. U.S. crude oil futures gained 2.6 percent and closed at $84.50 per barrel as traders priced a larger geopolitical risk premium into energy markets.
The agreement signed on June 17 was scheduled to expire Monday after creating a temporary framework for reopening the Strait of Hormuz.
Washington and Tehran had intended to use the arrangement while negotiating a final agreement concerning Iran’s nuclear program within 60 days.
Those diplomatic ambitions now appear to be collapsing. Iran’s Foreign Ministry spokesman, Esmail Baghaei, rejected talks about extending the memorandum, according to comments reported by the state news agency Tasnim.
“We did not start any negotiations at all, and the U.S. violated the understanding from the very beginning; therefore, the 60-day issue is not relevant,” Baghaei said, according to Tasnim.
His remarks indicated that Tehran no longer considers the original timetable binding or diplomatically useful.
A senior Iranian official also warned that the country could abandon its defensive posture if diplomacy with Washington fails.
That message intensified concern that energy infrastructure, commercial vessels, or regional military assets could face heightened danger.
“Iranian entities must be prepared to escalate tensions in the Strait of Hormuz and wider region, as Iran will be ready to make decisions and take action on difficult decisions,” the Iranian official told Reuters.
The warning placed the world’s most important oil transit corridor firmly at the center of the confrontation.
President Donald Trump showed little interest in preserving the arrangement.
During an interview with Fox News, he demanded that Iran “put up the white flag of surrender” and issued an explicit bombing threat against Oman if the U.S. ally interfered with American objectives in the strait.
Trump later told reporters in the Oval Office that he would not pursue an extension of the ceasefire.
The position left the oil market facing the possibility of renewed hostilities without an active diplomatic mechanism capable of limiting immediate escalation.
Physical shipping data already show severe pressure across Hormuz.
Only three vessels crossed the strait on Sunday, according to information supplied by commodity intelligence company Kpler, while the five day average stood at 12 vessel crossings.
The collapse in traffic is dramatic compared with normal operating conditions before the war began on Feb. 28. About 130 vessels transited the waterway before hostilities, illustrating the scale of the current paralysis affecting crude, fuel, and commercial cargo movements.
The Strait of Hormuz carries a critical share of global petroleum exports from producers across the Persian Gulf.
Any extended closure or military confrontation could tighten crude availability, raise tanker costs, increase insurance premiums, and disrupt refinery supply programs in Asia and other importing regions.
Bob McNally, president of Rapidan Energy, said Brent could move back toward $100 per barrel as Chinese purchasing recovers.
China has reduced its imports by roughly 4 million to 5 million barrels per day, helping prevent an even more explosive price increase during the Iran war.
That restraint may not last because Chinese refiners have a powerful incentive to capture elevated prices for gasoline, diesel, and other refined products. McNally expects Beijing to permit stronger crude imports so domestic refiners can take advantage of attractive processing economics.
“China coming off of its crash diet is is not consistent with Brent prices being stable,” the analyst said.
Renewed Chinese demand, restricted vessel traffic, and the disappearance of the temporary diplomatic framework could combine to drive another volatile surge across global oil markets.
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