Rabobank's Senior Macro Strategist Bas van Geffen notes Brent futures have surged above $112 as the closure of the Strait of Hormuz persists and negotiations between Iran and the US remain deadlocked. He highlights that futures prices are converging toward physical prices and argues near-term supply-demand balances are unchanged until the Iran war ends and Hormuz reopens, limiting scope for UAE output increases.

Hormuz closure drives Brent futures higher

"Brent futures topped $112/barrel, after news broke that US President Trump rejected Iran’s proposal to reopen the Strait of Hormuz. According to CNN’s sources, Iran is expected to submit a revised proposal in the next few days."

"In short, negotiations between the two sides remain as stuck as the ships trapped in the Persian Gulf. And odds of a military campaign that quickly breaks the stalemate appear to have lessened."

"So, with no end in sight for the closure of Hormuz, futures prices are closing in on physical prices."

"But, as our energy strategists note, this does not change anything about the near-term supply-demand balance. Only after the Iran war ends, and the Strait of Hormuz reopens can we discuss the UAE ramping up oil production."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)