Global oil prices extended their strong rally on Tuesday, August 11, 2026, as hopes for a reopening of the crucial Strait of Hormuz faded. The deadlock has fanned fresh global inflation fears and ramped up bets on upcoming US interest rate hikes.
Crude prices have surged around 10% over the past week. The United States and Iran appear no closer to a deal on the waterway, despite upbeat comments from the White House earlier in August.
Strait of Hormuz Deadlock Drives Rally
In the latest diplomatic setback, US President Donald Trump announced on Monday that he would seek conflict compensation from Iran as part of any peace negotiations. He cited attacks and killings stretching back decades allegedly backed or perpetrated by Tehran.
Trump’s remarks directly responded to Tehran’s demand for US war reparations as a precondition to resolving the crisis. The US president had previously stated he was "low-keying" his approach to let economic pressure mount instead of launching further military strikes.
However, the latest diplomatic friction has pushed a quick agreement further out of reach. On Monday, both main crude contracts jumped around 5%, followed by an additional rise of more than 1% on Tuesday.
Jason Wong, a strategist at BNZ, noted that in the absence of positive headlines on negotiations to reopen the strait, pressure on oil prices has remained upward. Stephen Innes, global strategist at Quintex Intel, described the situation as a game of chicken where both sides are trying to weaponize the oil barrel without firing shots.
Federal Reserve Rate Hike Fears Revive
The prospect of elevated oil prices has revived concerns over global inflation, boosting the likelihood of interest rate increases. Although a surprise loss of more than 20,000 jobs in the US economy last month initially eased fears of a Federal Reserve hike, rising energy costs could force the central bank's hand.
Cleveland Fed President Beth Hammack commented on the policy outlook, stating that one 25-basis-point move probably does not do a whole lot for the economy. She suggested that some number of movements might be required, though she declined to prejudge the exact number.
Traders are now awaiting the release of US consumer price data on Wednesday, which will play a key role in guiding the Federal Reserve's next policy decision.
Global Financial Markets React
At approximately 0715 GMT on Tuesday, West Texas Intermediate (WTI) crude stood 1.5% higher at $83.37 per barrel, while Brent North Sea crude rose 1.3% to $88.85 per barrel.
Equity markets showed mixed reactions following a quiet session on Wall Street. In Asia, Hong Kong's Hang Seng Index fell 1.0% to 25,679.98, and the Shanghai Composite dropped 0.8% to close at 3,934.09. Meanwhile, markets in Seoul, Sydney, Singapore, Taipei, and Manila posted gains, while Tokyo was closed for a public holiday.
In Europe, London's FTSE 100 rose 0.1% to 10,872.52, Frankfurt opened higher, and Paris remained flat. On the currency front, the euro fell to $1.1535 from $1.1543 on Monday, while the British pound slipped to $1.3505 from $1.3508. The US dollar dipped slightly against the Japanese yen to 159.22 yen from 159.31 yen, and the euro fell against the pound to 85.42 pence from 85.45 pence. In New York, the Dow Jones Industrial Average closed down 0.1% at 53,975.98.
