West Texas Intermediate crude closed at US$93.18 a barrel on Monday, down 0.13%, on the first trading day after President Donald Trump rejected Iran seven-day proposal to reopen the Strait of Hormuz in exchange for lifting the U.S. blockade of Iranian ports. The contract had traded as high as US$96.53 during the session, according to Investing.com data, and Bloomberg reported that it gave back a rise of as much as 4.5%. The rejection moved the price for a few hours and not for the day.
The reason is on the supply side. Preliminary Kpler data show exports from major Middle East producers of about 12.8 million barrels a day in September, the highest since the conflict began, according to EnergyNow. Trump also told Axios he expects talks to resume this week, and a U.S. official said he is willing to provide sanctions relief and release frozen funds in return for concrete Iranian steps on the nuclear program.
The Chain From the Strait to a Canadian Portfolio
The mechanism runs in three links. Oil above US$90 supports the earnings of Canadian producers, and Western Canadian Select traded near US$82.26 on Monday, according to EnergyNow. The same oil raises gasoline prices, which were 22.8% higher than a year earlier in August, according to TD Economics, and that lifts headline inflation to 3.0%. Higher inflation, in turn, keeps the Bank of Canada from easing, and the Bank said on September 2 that the continuing conflict in the Middle East is keeping energy prices high.
The result for a Canadian portfolio is a split. On Monday the S&P/TSX Composite fell 0.87% to its lowest close since July because gold and base metals sold off, while oil rose, according to Investing.com. Energy earnings are supported by the war and materials are punished by the rate response to it, and the two effects arrive in the same account.
Physical Supply Is Doing the Work the Diplomats Have Not
Vessels made 132 transits of the Strait of Hormuz from September 21 to 27, up from 116 the previous week, according to MarineTraffic data reported by Al Jazeera. About one-fifth of global oil supply passed through the strait before the war, and the strait saw roughly 130 crossings a day. Shipments through Hormuz are tracking toward about 7.4 million barrels a day this month, according to Kpler data cited by EnergyNow, so flows are recovering from a low base rather than normalizing.
WTI has held between US$85.76 and US$102.48 at the close since August 31, a 19% range, and it sits near the middle of it. The figures below show that path with the three events that moved it, and the level at which the rejection was absorbed.
Sunday sessions and the September 7 holiday session are excluded. The September 28 close of US$93.18 compares with an intraday high of US$96.53 that day.
Base Case, Tail Risk and What Would Change Both
The base case is a stalemate with recovering flows: talks resume, neither side concedes on sequencing, and WTI trades inside the range it has held since August 31. The sides remain apart on who takes which steps first, according to Axios, and Iran wants negotiations centred on the strait and the blockade rather than on nuclear concessions. Iranian officials have also doubted a deal before the U.S. midterm elections in November, according to Trading Economics.
The tail risk is a failure of the bypass routes. Saudi Arabia shut its East-West pipeline earlier this month after a Houthi attack and restarted it on September 22, according to Reuters as cited by CGTN, and the Saudi-led coalition intercepted two ballistic missiles and two drones launched by Houthi forces over the weekend, according to EnergyNow. A second pipeline outage while transits remain a fraction of normal would remove the supply cushion that absorbed Monday news.
The Canadian consequence is asymmetric. Diplomatic progress lowers oil, gasoline and inflation, which helps the Bank of Canada ahead of October 28 and hurts producers. Failure does the reverse, and it raises rate-hike odds that have already pressured materials and bonds. Canada also faces new U.S. tariffs and Canadian counter-measures that followed the breakdown of trade talks, which the Bank flagged on September 2 as making growth prospects more uncertain.