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Oil prices continued to climb on Monday as uncertainty deepened over efforts to secure crude flows through the Strait of Hormuz, a key global shipping corridor. Brent traded near $87.50 per barrel, while West Texas Intermediate (WTI) hovered around $81.98, extending gains of nearly 5% the previous day.

The rise comes amid growing pessimism that negotiations to ease tensions in the Middle East will succeed. Analysts say the impasse threatens to keep global oil prices elevated and volatile, a development with direct implications for Nigeria’s 2026 budget, which relies heavily on oil revenue.

Senior Market Analyst Samer Hasn of XS.com said markets are still awaiting confirmation of a proposed Iran-Oman agreement on managing the Strait of Hormuz. While such a deal could reduce attacks on ships and tankers, Hasn warned that the absence of U.S. support may limit its effectiveness.

He noted that diplomatic engagement between Iran and the United States has frozen, with Iran insisting on sweeping concessions to reopen the strait, including ending the war on all fronts, U.S. troop withdrawals, financial compensation and lifting sanctions.

The Wall Street Journal reported that Iran’s Supreme Leader, Mojtaba Khamenei, has appointed new hard‑line figures to lead the Revolutionary Guard, Basij, and the Supreme National Security Council, reducing the likelihood of Iranian concessions.

Meanwhile, U.S. and Israeli officials may avoid escalation until after their respective elections, creating what Israeli newspaper Yedioth Ahronoth described as a “strategic truce.” Analysts say this pause is partly aimed at preventing further shocks to the U.S. economy ahead of the midterm elections.

Hasn said these dynamics point to a “grey zone” of no peace, no war, where oil continues to flow through the strait – sometimes through smuggling routes – but under persistent risk of disruption, especially from Yemen‑based attacks.

Nigeria’s 2026 federal budget is built on assumptions of stable oil production and a benchmark price that is significantly lower than current market levels. Sustained high prices could have mixed effects. Elevated Brent prices above $85 per barrel could boost government earnings, helping Nigeria fund its fiscal plans, including social‑investment programmes and debt servicing.

However, higher energy prices may worsen inflation, complicating monetary‑policy efforts and raising the cost of living. Oil‑market instability could affect Nigeria’s foreign‑exchange inflows, influencing naira stability and external reserves.

Nigeria’s budget also assumes improved crude output. Any disruption in global shipping routes, including the Strait of Hormuz, could affect supply chains, tanker availability and insurance costs, indirectly impacting Nigeria’s ability to move crude to market.

Analysts say the current geopolitical stalemate suggests oil prices may remain elevated and prone to sudden spikes. Hasn warned that repeated shocks, including potential attacks on ships or infrastructure, could prevent prices from returning to pre‑war levels.

For Nigeria, the combination of higher oil prices and global instability presents both an opportunity for stronger revenue and a risk of fiscal strain. Abuja will need to balance these dynamics carefully as it implements the 2026 budget and advances reforms in the petroleum sector.