NEW YORK — Brent crude futures held near $85 a barrel Monday, Aug. 12, extending a six-session rally as U.S.-Iran negotiations over Strait of Hormuz vessel traffic broke down again. West Texas Intermediate settled up 5 percent at $82.13.
Hopes for a diplomatic agreement faded last week. Iran has said the strait will not reopen until the United States meets its demands, leaving traffic through the chokepoint severely disrupted.
The International Energy Agency warned of rapidly depleting global stockpiles and called for the strait's urgent reopening.
Supply pressure is building on multiple fronts. Ukrainian drone and missile strikes on Russian refineries and the port of Novorossiysk have damaged grain terminals and energy infrastructure. Houthi attacks on Saudi energy facilities have added to tightness in the energy complex, with diesel prices surging as a result.
The United States and Gulf states are pursuing alternative oil and trade routes to bypass the Hormuz and Bab el-Mandeb chokepoints. A separate project would expand U.S. liquefied natural gas exports to Asia via shorter Pacific shipping lanes, adding capacity beyond Gulf Coast terminals. Qatar, the United States and Argentina are driving a wave of LNG projects targeting Asian and European buyers.
China is routing cargo through the Arctic. Sea Legend launched a weekly container service on the route — branded the "Ice Silk Road" — that can cut China-Europe transit times roughly in half during summer months.
In Washington, the House of Representatives has taken up a bipartisan sanctions package targeting Russia's energy revenues, banks and sanctions-evasion networks, threatening steep tariffs on major buyers of Russian crude. The legislation adds another layer of geopolitical risk to global energy markets.
For fixed-income portfolios, the sustained crude rally is a duration problem. Energy costs at these levels keep inflation elevated, complicating central bank efforts to achieve price stability and pushing back the timeline for rate cuts. Longer-dated Treasuries bear the most exposure: a prolonged supply shock that re-anchors inflation expectations higher will steepen the curve and widen term premium, leaving investors in long duration holding the loss.
