US oil prices jumped above $80 a barrel Monday amid growing doubts over a deal to reopen the Strait of Hormuz, as reserves have dwindled to their lowest levels since 1983.
West Texas Intermediate crude oil prices rose 5.1% to settle at $82.13 a barrel while Brent crude increased 5% to $87.72 a barrel.
Remarks from President Trump over the weekend spooked investors who were hoping for a speedy deal between the US and Iran to ramp up tanker traffic in the Persian Gulf, as the commander-in-chief instead signaled he is willing to wait and use economic pressure on Iran.
“We are low-keying it,” Trump told Axios during a phone call Sunday when asked about talks with Tehran. “We are only semi-negotiating with them. We are just watching Iran with its huge inflation and the fact they have no money.”
The US Department of Energy on Monday announced that the US Strategic Petroleum Reserve, or SPR, has fallen below the 300 million-barrel mark – its lowest level in more than four decades as the Iran war fuels the worst energy supply disruption in history.
Oil prices have shot as high as $125 a barrel since the war in Iran broke out Feb. 28, but the US has been partly cushioned by its vast petroleum reserves.
Unless the free flow of vessels throughout the Middle East resumes soon, a dwindling supply suggests that gasoline prices could jump even higher.
National average gasoline prices remained stubbornly above $4 a gallon as of Monday, according to AAA – more than a dollar higher than pre-war prices.
The Dow Jones Industrial Average fell 151 points, or 0.3%, by about 2:20 p.m. ET, while the S&P 500 and Nasdaq slumped less than 0.1% and 0.4%, respectively.
Investors have been hoping for a more permanent US-Iran deal to reopen the Strait of Hormuz, especially after Trump last week canceled a planned attack and insisted that the two nations were holding talks.
Last week, Treasury Secretary Scott Bessent told CNBC that the two sides could reach a deal very soon to restore “freedom of movement” throughout the waterway.
But a deal has not yet been reached and Iran has made an extensive list of demands.
On Monday, Iran’s Foreign Ministry spokesman, Esmaeil Baqaei, said that the US must end its naval blockade before Tehran would agree to reopen the maritime route.
“As long as the US naval blockade continues, the necessary conditions for the reopening of the Strait of Hormuz do not exist,” Baqaei was quoted as saying by state news agency Tasnim.
Over the weekend, Iran also demanded that the US agree to lift sanctions, pay reparations for war damages, release frozen Iranian assets and halt any planned attacks.
Last month, the US and Iran signed a Memorandum of Understanding to reopen the strait – but it was short-lived, quickly dissolving after Tehran launched attacks on tankers traveling through the route along Oman’s coast instead of its own pre-approved route.
The US responded with multiple rounds of airstrikes and reimposed its naval blockade.
In the meantime, the SPR – which stood at roughly 415 million barrels before the Middle East conflict – fell to 298.7 million barrels last week, after tens of millions of barrels were drained to boost supply amid the Russia-Ukraine war and then the war with Iran.
The US Government Accountability Office has also warned that the emergency energy stockpile’s operational ability is at risk due to aging infrastructure that hasn’t been replaced.
In March, the International Energy Agency – which includes 32 member countries mostly in Europe, North America and northeast Asia – approved a record release of 400 million barrels of oil to support global supplies.
White House officials have repeatedly said that oil and gasoline prices will be quick to fall once the conflict is over.