Oil prices climbed more than 2 per cent on Tuesday as expectations of a near-term peace agreement between the United States and Iran weakened following fresh remarks by US President Donald Trump on reparations and control of the strategically important Strait of Hormuz.
At the time of reporting, Brent crude was trading at USD 89.806 per barrel, up 2.1 per cent, while US crude was quoted at USD 84.386 per barrel, registering a gain of 2.3 per cent.
The sharp rise in crude prices came after Trump said Iran should compensate the United States for damages he claimed Tehran had caused over the past five decades. He also asserted that the US Navy currently has "100 per cent control" over the Strait of Hormuz, a crucial global energy route through which a significant share of international oil shipments passes.
Speaking to reporters at the Oval Office, Trump said the United States was maintaining a blockade and had control over which vessels could enter the strategic waterway. "The only one that has control of the Strait of Hormuz right now is the United States Navy," Trump said, adding that Washington would seek compensation from Tehran as part of any future negotiations.
"They asked for reparations, they asked for money for the damage that we've done. And I said, that's a good idea. Well, we're to ask for money for the damage they've done over a 50-year period. So if there's damages to be paid, I think Iran should pay those damages," he said.
Trump's latest comments have added another layer of uncertainty to diplomatic efforts between Washington and Tehran. Earlier, the US President had rejected Iran's demand for financial compensation for damage caused during US-Israeli military operations in the country.
In a post on Truth Social, Trump said Iranian representatives had sought compensation for damage suffered during what he described as the "last five months Military Conflict". He said the conflict began after Iran refused to abandon its ambitions relating to nuclear weapons.
Trump also said he had directed US representatives to include Washington's compensation demands in all future negotiations with Tehran. The US President further demanded compensation from Iran for casualties and injuries that he attributed to Iranian actions. In making his case, he referred to alleged Iranian involvement in various conflicts and also cited victims of the 2000 USS Cole bombing.
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The latest developments come as Tehran has linked its own war-reparation demands to conditions for a possible reopening of the Strait of Hormuz. Iran has also called for the lifting of US sanctions and an end to naval blockades as part of the broader conditions surrounding a potential diplomatic settlement.
The conflicting demands have increased uncertainty over the possibility of a breakthrough between the two countries. Market participants are particularly concerned about the potential impact of any escalation on oil supplies and shipping through the Strait of Hormuz.
The waterway remains critical to global energy markets, and any prolonged disruption could tighten crude supplies and push prices higher. Traders are therefore closely monitoring statements from Washington and Tehran for signs of escalation or progress towards negotiations.
The latest movement in crude prices reflects the market's sensitivity to geopolitical developments, particularly those that could threaten energy transportation routes. With diplomatic prospects appearing less certain, investors are likely to continue pricing in a higher geopolitical risk premium.
Further developments in US-Iran relations, along with the situation around the Strait of Hormuz, are expected to remain key drivers of global oil prices in the near term.
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